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Budget 22.06.10 Key Measures

Kevin McDaid, ATT, CTA, Ex HMRC, 30 years + tax experience

120 Reevy Road, Wibsey, Bradford, BD6 3QE

kevmcd@cta.org.ukTel 01274 214979, Mob 07939 222437 


Income tax and National Insurance contributions (NICs)

From April 2011:

·                                 The personal allowance for those aged under 65 will be increased by £1,000 to £7,475 (basic rate taxpayers only).

·                                 The point at which employers start to pay Class 1 NICs, is to be increased by an extra £21 per week above indexation. Assuming nil inflation between now and September (the month which determines inflation for the following tax year) then the threshold will be £131 per week.


·                                 There is no corresponding increase in the point at which employees commence to pay NIC, which remains at £110 per week.

·                                 Both employers and employees NIC will increase by 1%. 

·                                 The basic rate threshold (the point at which 40% tax becomes payable) is to be reduced by approximately £2,500 to allow for the increased personal allowances – the logic being that nobody currently liable to tax at 40% will benefit from the budget.

Company tax

From 2011:

·                                 Main rate: reducing to 27% from 2011/12, and then reducing by 1% per year for five years.

·                                 Small companies rate reduced to 20%.

Capital allowances

From 2012

·                                 The rates of writing-down allowances (WDAs) for new and unrelieved expenditure on plant and machinery reduced from 20 per cent to 18 per cent (main rate pool) and from 10 per cent to 8 per cent for special rate pool.

·                                 The Annual Investment Allowance reduced from £100,000 to £25,000.

VAT

From: 4 January 2011

·                                 The main rate rises to 20%.

·                                 The Flat Rate scheme rates will be adjusted.

New employers

From September 2010, but applying to any new business set up after 22/06/2010

·                                 New businesses setting up outside London will not have to pay the first £5,000 of employers’ NICs during the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business and operate in selected countries and regions, (Yorkshire and the Humber are included).

Capital Gains Tax (CGT)

From: on or after 23 June 2010

·                                 The CGT rate rises from 18% to 28% for higher rate taxpayers.

·                                 The rate remains 18 per cent where total taxable gains and income are less than the upper limit of the income tax basic rate band. As was always the case up until a couple of years ago it will now once again be necessary to consider your income in any year in which you are likely to have a capital gain. 

·                                 For trustees and personal representatives of deceased persons, the rate is increased to 28 per cent (previously 18 per cent).

·                                 Entrepreneurs' Relief lifetime limit increases to £5 million.

·                                 CGT for entrepreneurs will remain taxable at 10%.

Furnished Holiday letting

From: 2011

The changes previously announced by the last government will not take effect, instead new measures will be considered to:

·                                 Ensure the FHL rules apply equally to properties in the EEA.

·                                 Increase the number of days that qualifying properties have to be available for, and actually let as, commercial holiday letting.

·                                 Change the way in which FHL loss relief is given.

Employment taxes


Pensions

From: now to 2011

All change

·                                 The aim is to find alternative (i.e. less complicated) ways of restricting pensions’ tax relief from 6 April 2011 by reforming the existing pension savings allowances, principally by significantly reducing the annual allowance.

·                                 Provisional analysis has suggested that the level of a reformed annual allowance may be in the region of £30,000 to £45,000; currently it is £255,000.

·                                 The reformed allowances would replace the high income excess relief charge, which currently is due to come into force on 6 April 2011.

Pensioners

From 2011

·                                 Relinking of basic state pension to earnings.

Also ran:

·                                 The previously proposed tax relief on VDU games development is abolished (a measure announced in the March Budget).

·                                 Measures to freeze council tax if councils can make necessary savings.

·                                 Bank levy from 2011.

·                                 An overhaul of state benefits includes:

o                                                        Child benefit frozen

o                                                        Major overhaul of Child Tax Credits

o                                                        Tax credits cut for families with income over £40,000

o                                                        Medical assessment for Disability Living Allowances

o                                                        Overhaul on Housing Benefit

o                                                        Freeze on public sector pay

o                                                        Increase in state pension age to 66 years
 
Please do not hesitate to contact me should you wish to discuss how the Budget may impact on you or your business.
 
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