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Post Election Budget Report 2010

Posted by: edwinsmith on June 22nd, 2010

The post election budget 2010 main changes are as follows:

Income Tax

There is no change to the 2010/11 rates and allowances.

For 2011/12 legislation will be introduced to increase the personal allowance for those under 65 by £1,000 to £7,475 for basic rate payers only. The basic rate limit will not be determined until the September 2010 retail price index (RPI) figure is known.

National Insurance Contributions (NIC)

For 2011/12 the secondary threshold, which is the point at which employers start to pay Class 1 NIC, is to be increased by an extra £21 per week above indexation.

The secondary threshold for 2011/12 will not be known until publication of the RPI for September.

This change is in addition to the increase in the primary (employee) threshold already planned for 2011/12, and the 1 per cent rise in rates.

Regional Employers National Insurance Holiday

Subject to meeting the necessary legal requirements, the government will shortly announce a scheme where for the next three years new businesses set up outside of London, the South East and the Eastern regions will be exempt from up to £5,000 of Class 1 employers’ national insurance payments, for each of their first 10 employees hired in their first year of business.

The government hopes to launch this scheme by September, but any qualifying new business set up from today will qualify.

VAT Increase

The Standard rate of VAT will increase from 17.5% to 20% for any supply made on or after 4 January 2011 and any acquisition or importation taking place on or after that date.

Anti-forestalling legislation and changes to the VAT flat rate scheme percentages will also be introduced as a result of this measure.

Changes to the Payment on Account regime thresholds will be made at a later date to maintain the status quo of the scheme.

Corporation tax

The corporation tax rates for the financial year commencing 1 April 2011 will be reduced to the following rates:

  Profits Rate
Main rate In excess of  £1,500,000 27%
Small Profits rate Below £300,000 20%


A marginal rate will be effective between these limits.

The main rate will be further reduced by 1% each year until 2014/15, when it will be 24%.

Capital allowances on plant and machinery

The capital allowance rates will be reduced with effect from 1 April 2012 (for Corporation Tax) or 6 April 2012 (for Income Tax) to the following rates:

Writing down allowances: Rate per annum
Main Rate Pool 18%
Special Rate Pool 8%
Annual Investment allowance £25,000


Expenditure on long life assets, thermal insulation, integral features and cars with emissions of 160g/km or more (in the case of cars purchased on or after April 2009) is allocated to the special rate pool.

A 100% first year allowance will be introduced for the purchase of new / unused zero emission goods vehicles for 5 years commencing on 1 April 2010 (for Corporation Tax) and 6 April 2010 (for Income Tax).  This rate is subject to certain conditions.

Furnished holiday lettings

The furnished holiday lettings rules (FHL) will not be withdrawn from 6 April 2010 (1 April 2010 for companies) although the government will publish a public consultation over the summer about plans to change the tax treatment of furnished holiday lettings from April 2011.

Capital gains tax (CGT)

From 23 June 2010, the rate of CGT for individuals where their total taxable gains and income is below the higher rate threshold will remain at 18%. However, for gains above that amount, the tax rate increases to 28%. For trustees and personal representatives, all taxable capital gains will be taxed at 28%.

The rate of CGT for gains qualifying for entrepreneurs’ relief remains 10 per cent. The lifetime limit on gains qualifying for entrepreneurs’ relief is increased from £2 million to £5 million. This applies for gains made on or after 23 June 2010.

The annual exempt amount remains at £10,100 for 2010/11.

Gains arising in 2010/11, but before 23 June 2010, will continue to be liable to CGT at 18% and will not be taken into account in determining the rate (or rates) at which gains of individuals arising on or after 23 June 2010 should be charged.

Child and Working Tax Credit rates

The budget announced several changes to the child and working tax credits. Summarised below are the main changes coming into effect in April 2011.

The child element of the Child Tax Credit will increase by £150 above the Consumer Prices Index (CPI) in April 2011. The baby element of the Child Tax Credit will be removed from April 2011. There will also be changes to the thresholds and withdrawal rates as set out below:

  2010/11 2011/12
First withdrawal rate 39% 41%
Second income threshold £50,000 £40,000
Second withdrawal rate 6.67% 41%
Income disregard £25,000 £10,000


From April 2012, the period for which a tax credit claim and certain changes of circumstances can be backdated will be reduced from three months to one month.

Child benefit

From 2011/12, both rates of Child Benefit will be frozen for three years.

Pensions – annual allowance

The government announced that it is considering restricting pensions tax relief from 6 April 2011, by reforming the existing pension savings allowances, principally by significantly reducing the annual allowance. It has been suggested that the level of a reformed annual allowance may be in the region of £30,000 to £45,000.

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

Individual Savings Accounts (ISA)

From 6 April 2011 the annual ISA subscription limits will be linked to the RPI on an annual basis. The new limits will be calculated by reference to the RPI for the September before the start of the following tax year, and HMRC will announce the new limits each year in advance of the start of the new tax year in which they will apply. They will be rounded to a convenient multiple of £120. In the event that the RPI is negative, the ISA limits would remain unchanged.

Please contact us at Edwin Smith if you would like to discuss the Post Election Budget Report 2010 in more detail or apply any changes to your specific circumstances.

This blog news page is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.

Filed under: Budget Report, Tax, VAT

Form 42 Employment-related securities

Posted by: edwinsmith on June 21st, 2010

The 2009/10 form must be completed and returned to the Employee Shares & Securities Unit by 6 July 2010. If the form was issued on or after 8 June 2010, it must be returned within 30 days from the date of issue shown on the form.

Penalties may be chargeable where the form is received late or is incomplete or inaccurate.

The form requires details of security options granted to or exercised by employees, securities acquired by employees and events occurring after the acquisition of the securities. Where a limited company is incorporated in the UK in the year ended 5 April 2010 a report of the acquisition of the initial subscriber shares (also called founder shares) by the directors or prospective directors is not required if certain conditions are fulfilled. Details of the conditions to be met are in form 42 guidance.

The majority of newly UK incorporated companies should meet the conditions and will be relieved of the requirement to complete this form.

The facility to file these returns online has been suspended from 1 April 2010, as part of an overhaul of HM Revenue & Customs IT infrastructure so you will need to file a paper return. Since 6 April 2010 the Employee Shares & Securities Unit is being transferred from London to Nottingham and forms should be returned to the Nottingham address regardless of the address on the form.

For assistance with completing your year end forms or for further information on the above topic please contact us.

Filed under: PAYE

Tax credit renewal packs and notifying changes

Posted by: edwinsmith on June 18th, 2010

Anyone claiming working or child tax credits will shortly (or you may have already) receive a renewal pack. The forms are to help HMRC check that you were paid the right amount of money in the year ended 5 April 2010 and that you are on track to receive the right amount in the current year.

Your renewal pack may be made up of just an Annual Review notice or both and Annual Review notice and an Annual Declaration.

The Annual Review notice

The Annual Review notice gives details of the tax credits you received during the year and your personal circumstances. It also tells you how to renew your tax credits. You get an Annual Review notice only if either you just get the family element of Child Tax Credit or you claimed tax credits but didn't get them because your income is too high (a ‘nil award’). You should check that the personal circumstances you gave to the Tax Credit Office at the start of your award period are correct and that any changes that you have since reported are shown.

The Annual Declaration

The Annual Declaration asks you to provide details of your income for the tax year that started on 6 April 2009 and ended on 5 April 2010. You will need to work out your total income so that you can check if the income shown on the Annual Review notice is correct, and then correctly complete your Annual Declaration (if you were sent one).

There should be a working sheet in the notes sent with your renewal pack which you can use. Your adviser is also available to provide assistance if required. Guidance on working out your total income is also available on the HMRC website.

When to renew

If you received both an Annual Declaration form and an Annual Review notice then you should deal with the renewal as soon as possible but by 31 July deadline at the latest (unless your renewal pack states otherwise).

If you are unable to provide details of your actual income for the last tax year prior to the deadline you should renew using an estimate of your income which is as accurate as possible and make it clear that the income is based on an estimate. If you’ve given details of estimated income then you are usually required to provide actual amounts by 31 January but check your Annual Review notice to see if you’ve been given a different date.

If the Tax Credit Office doesn’t hear from you by 31 July - or the deadline on your renewal pack - they will stop your tax credits payments and send you a statement showing you whether you’ve been paid too much, or not enough, tax credits. You then have a further 30 days to provide the information asked for. If you don’t provide the information within 30 days, you will usually have to make a new tax credits claim. You will also be asked to pay back any overpayments from the last tax year - and any payments made to you since 6 April.

If you just received an Annual Review notice, then you will only need to renew if the information in the notice has changed, or if anything is wrong, missing or incomplete, the deadline remaining as above.

Keeping your details up to date

Not doing so is the main reason that overpayments of tax credits arise. It is important that you notify HMRC of any changes to your personal circumstances as soon as they arise to avoid under or overpayments of your tax credits. A penalty could also be imposed.

Please see the HMRC website for a full list of the changes which should be reported. These can be reported by contacting the tax credit helpline.

I don’t claim tax credits

If you don’t currently claim tax credits because your income is too high, you may wish to consider making a protective claim in case your circumstances change, particularly if you are self employed and your profits fluctuate. Claims can only be backdated for three months and you could miss out. If you think this could apply to you, then please contact your adviser to discuss this further.

Filed under: Tax

P9D, P11D and P11D(b) filing deadline

Posted by: edwinsmith on June 16th, 2010

The annual expenses and benefits forms are due for filing with HMRC by 6 July 2010.

If you are an employer providing benefits to employees or reimbursing expenses then you must complete one of the following forms for each employee detailing the expenses/benefits paid during the year ended 5 April 2010:

  • P9D - for employees earning less than £8,500
  • P11D - for employees earning more than £8,500

A P11D(b) form summarising the total taxable benefits and calculation of the Class 1A National Insurance due should also be completed.

To avoid a penalty all forms must be submitted to HMRC by 6 July 2010.  A copy of the P9D or P11D form should also be provided to the employee by 6 July 2010.

Methods of submission/payment to HMRC

The following methods are all acceptable ways of submitting the P9D, P11D and P11D(b) forms to HMRC:

  • Complete a paper version and send by post
  • Use the interactive version contained on the employers CD-ROM and send by post
  • File the forms electronically using the HMRC website.

Any Class 1A National Insurance must be paid to HMRC by 19 July (22 July if you pay electronically).  The HMRC website has details of how to make Class 1A National Insurance payments.


If you have obtained a dispensation from HMRC regarding the expenses/benefits paid to your employees then there is no requirement to report the dispensed items on the P9D/P11D form.  Our previous post details how dispensations can now be applied for online as well as by post.

For assistance with completing your payroll year end forms or for further information on the above topic please contact us.

Filed under: PAYE

VAT – direct debit facility – leave five working days

Posted by: edwinsmith on June 7th, 2010

Many businesses are now obliged to file their vat online as reported in our post VAT returns online and electronic payment. This obligation also means that the payment must be made electronically.

There are various methods of electronic payment and in most cases they give you up to seven extra calendar days in which to pay - or at least ten calendar days if paying by Direct Debit online.

When using the direct debit facility, it is important to leave at least five bank working days between setting up the direct debit facility online and filing your next return online.  If this minimum period is not left, then it is likely that the amount due will not be collected and you will have to make arrangements to pay your VAT by an alternative electronic method.

When you set up the direct debit, the system will tell you the earliest date from which HMRC will collect payment from the account. You should not submit a return until after this date if you wish for the VAT to be collected by direct debit. If you have not left enough time to wait until after this date then you will need to just submit the return and make a payment by an alternative electronic method.

Once the system is set up it will be ready to collect the VAT due for all future returns.

When you have submitted a VAT return, the acknowledgement for the submission will state how the VAT will be paid, whether directly from your bank on the date stated or whether you will need to pay it by an alternative electronic method.

Don’t forget that if the VAT payable to HMRC on your return is less than £1, then you don't need to pay anything to HMRC or carry the amount forward!

For more information about setting up and paying by direct debit, please visit the HMRC website or contact us for advice.

Filed under: VAT

Revised advisory fuel rates from 1 June 2010

Posted by: edwinsmith on June 1st, 2010

H.M. Revenue and Customs (HMRC) have published the latest advisory fuel rates relating to mileage payments for business travel in company cars. These are as follows: 

Engine size Petrol Diesel LPG
1400cc or less 12p 11p 8p
1401cc to 2000cc 15p 11p 10p
Over 2000cc 21p 16p 14p

The new rates will be effective from 1 June 2010, however for the first month employers may continue to use the previously published rates if they choose to.

These rates will be reviewed again later in the year and any changes made will be effective from 1 December 2010.  The revised fuel rates will be published on this page when they are released.

Advisory fuel rates can be used to calculate the following:

  • Reimbursement to employees of fuel used for business travel in a company car
  • Repayment by employees of fuel used for personal travel in a company car
  • Allowable input VAT on business mileage claims

A more detailed explanation of the use of these rates is on the HMRC website.

The rates applying for earlier periods are also on the HMRC website.

If you have any questions regarding the use of advisory fuel rates or mileage payments please contact us.

Filed under: PAYE, Tax, VAT