Budget Report

2015 Budget

Posted by: edwinsmith on March 20th, 2015

The key announcements in the 2015 Budget are as follows:

Personal Taxation

Income Tax

From 6 April 2016, the personal allowance will be increased by £200 from £10,600 to £10,800.

From 6 April 2017, the personal allowance will be increased by a further £200 to £11,000.

The basic rate limit threshold will be increased to £31,900 for 2016/17 from £31,785. The personal allowance and basic rate limit will be £42,700.

The basic rate limit threshold will be increased to £32,300 for 2017/18. The personal allowance and basic rate limit will be £43,300.

The higher personal allowance for those born before 6 April 1938 will be removed with effect from 2016-17, so that everyone regardless of their age, is entitled to the same personal allowance.

By 2020 end-of-year tax returns will be scrapped in favour of "real-time" online accounts. It is planned that individuals and small businesses will submit accounts throughout the year via computer, tablet or smartphone.

A new personal savings allowance will come into effect in April 2016. Designed to create tax-free banking for 95% of the population. Basic rate taxpayers will be exempt from paying tax on £1,000 of savings income, higher-rate taxpayers will benefit from a smaller personal savings allowance of £500, and anyone earning more than £150,000 a year will not receive the benefit of the new savings allowance.

Plans have been announced to increase the number of years in which a self-employed farmer can average profits for income tax purposes from two to five, with effect on 6 April, 2016.

A new “flexible” ISA has been introduced. This will allow users to withdraw money from an ISA without losing any of their annual allowance. So long as Isa money is taken out and replaced during the same tax year, such a move would not count towards the annual Isa contribution limit, which is due to rise in any case to £15,240 this coming April.

Pension pot lifetime allowance will be reduced from £1.25 million to £1 million.

National Insurance

Class 2 NI contributions for self-employed is to be entirely abolished in the next parliament.

No employers NI on workers under 21, from April 2015, as long as they earn under £815 a week (£42,380 a year), and a similar policy will be introduced for young apprentices from April 2016.

Benefits In Kind

In line with a 2014 budget announcement, legislation will provide a benefit charge for vans which do not emit CO2 (zero emission vans), beginning in 2015-16.

The van benefit charge for zero emission vans will be 20% of the value of the van benefit charge for vans which emit CO2 in 2015-16, 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20. From 2020-21, there will be a single van benefit charge applying to all vans.

In line with a 2014 budget announcement, legislation will provide a statutory exemption from tax for qualifying trivial benefits in kind (BIKs) costing £50 or less. Following technical consultation on the draft legislation, an annual cap of £300 will be introduced for office holders of close companies, and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax. Corresponding legislation will also be introduced for National Insurance contributions purposes. These changes will have effect from 6 April 2015.

An exemption replaces the rules that require employers to either apply to HMRC for an agreement known as a ‘dispensation’ so that they can provide expenses and benefits free of tax and National Insurance contributions, or to report such expenses and benefits to HMRC. However the exemption will not apply where expenses are paid as part of a salary sacrifice arrangement. Following consultation, the legislation has been revised to ensure that the exemption cannot be used in conjunction with other arrangements that seek to replace salary with expenses. These changes will have effect from 6 April 2016.

Business Taxation

Corporation Tax

From 1 April 2015 corporation tax will be charged at 20% and there will no longer be the small profits rate or marginal rate of corporation tax.

R&D Tax Credits

In line with a 2014 budget announcement, legislation will restrict expenditure in respect of consumable items that qualify for R&D tax credits where a company sells the products of its R&D activity as part of its normal business. The revised definition of qualifying consumable items makes it clear that the cost of materials incorporated in such products that are then sold will not be eligible for the relief. This ensures that R&D tax credits remain well targeted in incentivising R&D investment. Draft legislation was published for consultation in December 2014. Following consultation the legislation clarifies that the restriction will not apply where the product of the R&D is transferred as waste, or where it is transferred but no consideration is received.

VAT

On 01 April 2015 the VAT registration threshold rises from £81,000 to £82,000 and deregistration threshold from £79,000 to £80,000.

In line with a 2014 budget announcement, the government will refund to charities providing palliative care the VAT they incur. The Finance Bill 2015 will include legislation to provide for refunds of the VAT these bodies incur on or after 1 April 2015 in relation to their nonbusiness activities.

Regulations will be introduced so that supplies made by foreign branches will no longer be taken into account when working out how much VAT incurred on overhead costs can be deducted in the UK. This will affect partly exempt businesses, and they will have to implement the change from the beginning of their next partial exemption tax year falling on or after 1 August 2015.

In line with a 2014 budget announcement, legislation will be included in Finance Bill 2015 to introduce a new VAT refund scheme for blood bike charities. It will enable these charities to reclaim the VAT incurred on the purchase of goods and services.

Excise Duties

Alcohol

As announced at Budget 2015, legislation will be introduced in Finance Bill 2015 to reduce the following alcohol duty rates by 2%.

spirits;
sparkling cider and perry not exceeding 5.5% alcohol by volume (abv);
still cider and perry not exceeding 7.5% abv;
beer between 2.8% and 7.5% abv; and
wine and made-wine exceeding 22% abv.

The legislation will also reduce the duty rate for low strength beer (less than 2.8% abv) by 6%, overall duty rate for high strength beer (above 7.5% abv) by 0.75% and for still cider and perry exceeding 7.5% abv by 1.3%.

This will reduce the price of a typical bottle of spirits by 18 pence, a typical litre of cider by 1 penny, and a typical pint of beer by 1 penny. These changes will take effect from 23 March 2015. The duty rates on wine and made wine not exceeding 22% abv and sparkling cider of a strength exceeding 5.5% abv have been frozen.

Tobacco

The duty rates for all tobacco products will increase at a rate of 2% above the rate of inflation, based on the Retail Price Index (RPI), from 6pm on 18 March 2015.

Fuel

The scheduled increase in fuel duty for September has been scrapped.

Other Policies

“Help To Buy ISA”

A “Help To Buy ISA” will be launched for first-time buyers. Further information on this will follow when available.

If you require further help please contact us

Filed under: Budget Report

2014 Budget

Posted by: edwinsmith on March 20th, 2014

The key announcements in the 2014 Budget are as follows:

PERSONAL TAXATION

Income Tax

From 6 April 2015, the personal allowance for those born after 5 April 1948 will be increased by £500 from £10,000 to £10,500.

The basic rate limit threshold will be reduced to £31,785 for 2015/16 from £31,865. The personal allowance and basic rate limit will be £42,285, a 1% increase on 2014/15 £41,865 as previously announced in the Autumn statement 2013.

For people born on or before 5 April 1948 there is no increase in the personal allowance, currently £10,500 with a higher allowance of £10,660 for those born before 6 April 1938.

Legislation will be introduced in the Finance Bill 2014 so that a spouse/civil partner can transfer part of their personal allowance to the other spouse/civil partner. For 2015/16 £1,050 of the personal allowance will be transferable from an individual whose income is below the personal allowance or who is liable at the basic rate, dividend ordinary rate or starting rate for savings. The receiving spouse/civil partner is eligible to receive the allowance if they are liable to tax at the basic rate, dividend ordinary rate or starting rate for savings. For 2016/17 the amount transferable will be 10% of the personal allowance.

For 2015-16 the main rates of income tax will remain at the 2014/15 rates - 20% basic rate, 40% higher rate and 45% additional rate.

From 6 April 2015 the starting rate of tax for savings will reduce from 10% to nil. The maximum amount of taxable savings income that can be eligible for the starting rate will also increase from £2,880 to £5,000. When combined with the increase in the personal allowance, this means that savers will not be liable for tax on any interest if their total taxable income is less than £15,500. The eligibility requirements to enable an individual to have their interest paid gross will change to accommodate the new provisions.

ISA

From 1 July 2014 all ISAs will reform in to a simpler New ISA (NISA) with the overall annual subscription limit increasing to £15,000, £4,000 for Junior ISAs. There will be changes so that the full amount subscribed can be in cash and a wider range of securities will be eligible to be included.

Company Car Tax rates 2017/18 and onwards

For 2017/18 and 2018/19 there will be an increase in the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre of two percentage points to a maximum of 37 per cent.

Van Fuel Benefit Charge 2015/16

The van fuel benefit charge will increase by inflation in 2015-16 based on the increase in the September 2014 Retail Price Index (RPI).

Company Car and Van Fuel Benefit Charge 2015/16

The rate of fuel benefit charge for company cars and fuel benefit charge for company vans will also increase in line with inflation (based on RPI) for 2015-16. The increase will be based on the September 2014 RPI figure.

Pensions

Changes to the limits from 27 March 2014 to drawdown, trivial commutation and small pots will affect the benefits to be taken as pension income drawdown and taxed lump sums.

The government has also announced a consultation document to consider proposed changes from April 2015 to allow greater flexibility for withdrawing from pension contribution schemes.

These changes will have a major effect on retirement options and strategies and we will produce a separate article on this in the next month or two. Please speak to us in the meantime.

CAPITAL TAXATION

Seed Enterprise Investment Scheme – Capital Gains Reinvestment Relief

Legislation will be introduced in Finance Bill 2014 to make permanent the capital gains tax (CGT) relief for reinvesting gains in SEIS shares without time limit. The relief will apply to half the qualifying re-invested amount.

BUSINESS TAXATION

Research and development tax relief for small and medium sized companies

From 1 April 2014 the rate of research and development payable tax credit will be increased from 11% to 14.5% for loss making small and medium sized enterprises.

Class 2 National Insurance process simplification for the self-employed

Legislation will be introduced to simplify the administrative process for the self-employed by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs. The intention is for this to apply from April 2016.

Annual Investment Allowance

The maximum annual amount increases on 1 April 2014 for corporation tax and 6 April 2014 for income tax from £250,000 to £500,000 for the period to 31 December 2015. From 1 January 2016 it will revert back to the original annual maximum of £25,000.

VAT

Registration and deregistration limits

From 1 April 2014, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £81,000 (currently £79,000).

The deregistration threshold will increase to £79,000 (currently £77,000).

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased to £81,000 (currently £79,000).

Changes to the rules on prompt payment discounts

To bring the UK in line with European law from 1 April 2015 businesses will need to account for VAT on the amount received for a supply. Currently HMRC accept VAT calculated on the prompt payment discount figure even if the discount is not taken. A consultation process will take place to implement the new rules. However, this will apply to telecommunications and broadcasting services where there is no obligation to provide a VAT invoice from 1 May 2014.

EXCISE DUTY

From 6 pm on Thursday 19 March 2014 the following changes will take effect:

Tobacco duty – 2% above the rate of inflation

The following increases are effective from 24 March 2014:

Alcohol duty – inflationary increase on duty for wine and made-wine, and sparkling cider of a strength exceeding 5.5%. The duty rates on beer will decrease by 6% for low strength beer, 2% for the standard rate of beer duty and 0.75% overall for high strength beer. The duty rates on spirits, ordinary cider and perry have been frozen.

The exemption cut-off will change for vehicle excise duty on 1 April 2014 for vehicles registered before 1 January 1974. This will change annually so that vehicles over 40 years old will be exempt from vehicle excise duty.

OTHER DUTIES

There are proposed reductions to bingo duty and a higher machine game duty.

A document containing the tax rates applying for 2014-15 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2014 Budget in more detail or to apply any changes to your specific circumstances.This article 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, Business, Individuals, National insurance, Tax, VAT

Budget 2013

Posted by: edwinsmith on March 21st, 2013

The key announcements in the 2013 Budget are as follows:

PERSONAL TAXATION

Income Tax

From 6 April 2014, the personal allowance for those born after 5 April 1948 will be increased by £560 from £9,440 to £10,000. Starting from 2015/16 the personal allowance will increase in line with inflation each year based on the Consumer Prices Index.

The basic rate limit threshold will be reduced to £31,865 for 2014/15 from £32,010. The personal allowance and basic rate limit will be £41,865, a 1% increase on 2013/14. This limit will further increase by 1% for 2015/16 to £42,285.

For people born on or before 5 April 1948 there is no increase in the personal allowance, currently £10,500 with a higher allowance of £10,660 for those born before 6 April 1938.

For 2014-15 the main rates of income tax will remain at the 2013/14 rates - 20% basic rate, 40% higher rate and 45% additional rate.

New childcare scheme

A new scheme will be phased in from autumn 2015 initially for children under 5 but to be extended over time to include children under 12 to support families with both parents working and single working parents where support is not received through the childcare element of working tax credits/universal credit. The scheme will not be available to families where one parent has an income over £150,000. For childcare costs of up to £6,000 per year per child support of 20% will be available. Consultation will take place on the detail.

Exemption threshold for employer provided beneficial loans

For 2014/15 and subsequent years the current threshold of £5,000 will increase to £10,000 for employment-related taxable cheap loans. As long as the balances on all such loans do not exceed the threshold in a tax year the employer will not need to report the loan to HMRC and there will be no tax charge on the employee.

Company Car Tax rates 2015/16 and onwards

Legislation will be introduced in the Finance Bill 2013 to introduce two new appropriate percentage bands for company cars emitting 0-50g of carbon dioxide per kilometre (with appropriate percentage set at 5%) and 51-75g of carbon dioxide per kilometre (with appropriate percentage set at 9%). For 2015/16 as set out in the 2012 budget there will be an increase in the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre of two percentage points to a maximum of 37 per cent. The 2013 budget also sets out a commitment to the percentage point differential for the first three bands through to 2019/20.

Van Fuel Benefit Charge 2014/15

The van fuel benefit charge will increase by inflation in 2014-15 based on the increase in the September 2013 Retail Price Index (RPI).

Company Car and Van Fuel Benefit Charge 2014/15

The rate of fuel benefit charge for company cars and fuel benefit charge for company vans will also increase in line with inflation (based on RPI) for 2014-15. The increase will be based on the September 2013 RPIfigure.

Pensions tax relief

Legislation will be introduced in the Finance Bill 2013 to reduce the annual allowance to £40,000 and to reduce the standard lifetime allowance (LTA) to £1.25m from 2014/15 onwards as announced in the Autumn Statement 2012. Where there is a reduction in the LTA an individual protection regime will be consulted on to include in the Finance Bill 2014 to add to the fixed protection regime already available.

CAPITAL TAXATION

Capital Gains Tax Annual Exempt Amount

The annual exempt amount for capital gains tax increases from £10,600 to £10,900 for 2013-14.

Seed Enterprise Investment Scheme – Capital Gains Reinvestment Relief

Legislation will be introduced in Finance Bill 2013 to extend the capital gains tax (CGT) relief for reinvesting gains in SEIS shares to gains accruing in 2013-14 when those gains are reinvested during 2013-14 or 2014-15. The relief will apply to half the qualifying re-invested amount.

Inheritance tax allowance

There have been no changes to the inheritance tax of £325,000. The intention was to freeze this at this level until April 2015 but this has now been extended to April 2018.

Inheritance tax - Limiting the deduction for liabilities on death

Legislation will be introduced in Finance Bill 2013 to amend the inheritance tax provisions which allow a deduction from the value of an estate for liabilities owed by the deceased on death. The changes are being introduced in response to avoidance schemes and arrangements which exploit the current rules that allow a deduction regardless of whether or not the liabilities are paid after death, or how the borrowed funds have been used.

Inheritance tax – spouses and civil partners domiciled overseas

Legislation will be introduced in Finance Bill 2013 to increase the lifetime cap of £55,000 on transfers to non-uk domiciled spouses or civil partners to the nil rate band of £325,000 with effect from 6 April 2013.

Also a new election regime will be introduced for individuals domiciled other than in the UK and who are married or in a civil partnership with a UK domiciled person, who will be able to elect to be treated as UK-domiciled for IHT purposes.

BUSINESS TAXATION

Corporation tax

The Finance Bill 2013 will introduce legislation to reduce the main rate of corporation tax for non-ring fenced profits for the financial year commencing 1 April 2014 to 21% (as mentioned in the 2012 Autumn Statement) and also to reduce the rate for the financial year commencing 1 April 2015 to 20% to unify with the small companies rate which remains unchanged at 20%. The main rate applies to profits in excess of £1.5m and the small profits rate to profits below £300,000. A marginal rate will be effective between these limits.

National insurance £2,000 employment allowance

For 2014/15 an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs liability will be introduced. The allowance will be claimed as part of the normal payroll process through RTI. Legislation will be introduced later in the year.

Tax simplification for small businesses

The Finance Bill 2013 will introduce legislation following the consultation and review of small business taxation, to introducing a voluntary cash basis for unincorporated businesses up to the VAT registration threshold with effect from 2013/14.

Class 2 National Insurance process simplification for the self-employed

The Government will consult on options to simplify the administrative process for the Class 2 National Insurance by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs.

Capital allowances on low emission vehicles

Legislation will be introduced in Finance Bill 2015 to extend the 100 per cent allowance (FYA) for expenditure incurred on cars with low carbon dioxide emissions and electrically propelled cars for an additional three years to31 March 2018.

VAT

Registration and deregistration limits

From 1 April 2013, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £79,000 (currently £77,000).

The de-registration threshold will increase to £77,000 (currently £75,000).

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased to £79,000 (currently £77,000).

Fuel Scale charges

Fuel scale charges will be revised effective from 1 May 2013. These will be published on our news feed.

Changes to the place of supply rules

Legislation will be introduced in Finance Bill 2014 to tax intra-EU business to consumer supplies of telecommunications, broadcasting and e-services in the Member State in which the consumer is located. These services are currently taxed in the Member State in which the business is established. The changes will take effect from1 January 2015and implement already agreed EU legislation into UK legislation, ensuring that these services are taxed fairly in the Member State of consumption.

To save the need for businesses affected by these changes to register for VAT in other Member States, a Mini One Stop Shop will also be introduced from1 January 2015. This is an IT system that will give businesses the option of registering in just the UKand accounting for VAT due in other Member States using a single return.

EXCISE DUTY

From 6pm on Wednesday 20 March 2013 the following changes will take effect:

Tobacco duty – 2% above the rate of inflation

The following increases are effective from 25 March 2013:

Alcohol duty – 2% above inflation for spirits, wine and made-wine, cider and perry. The duty rates on beer will decrease by 6% for low strength beer and 2% for the standard rate of beer duty.

A document containing the tax rates applying for 2013-14 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2013 Budget in more detail or to apply any changes to your specific circumstances.

This article 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, National insurance, PAYE, Tax, VAT

2012 Autumn Statement

Posted by: edwinsmith on December 6th, 2012

The Chancellor delivered the Autumn Statement on 5 December 2012 and the following announcements were made that affect tax rates and allowances etc.

Corporation Tax

The main rate of corporation tax will be cut a further 1 % from April 2014 to 21%.

Business Tax (Companies and self employed)

There will be a temporary but significant increase in the Annual Investment Allowance from £25,000 to £250,000 for two years to support new investment in plant machinery by small and medium sized businesses. It would appear the increase applies for two years from 1 January 2013.

Please contact us before taking any action as transitional rules will apply on the change from £25,000 to £250,000 in the period 1 January 2013 - to 31 March 2013 for corporation tax and to 5 April 2013 for income tax.

Income Tax

A further increase of £235 in the personal allowance for individuals in April 2013 taking it to £9,440 for the 2013/14 tax year.
The higher rate threshold will be increased by 1% rather than inflation in 2014-15 and 2015-16.
From 2014-15 there will be reductions to tax relief available on pension contributions. The lifetime allowance for pension contributions will be reduced from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000.

Capital Gains Tax

The annual exempt amount for capital gains will be increased by 1% each year in 2014-15 and 2015-16.

Inheritance Tax

Inheritance tax nil rate band will increase by 1% in 2015-16 from £325,000 to £329,000.

Other measures announced include the following:

Cancelling the 3.02 pence per litre fuel duty increase planned for 1 January 2013, deferred to 1 September 2013.
Working age tax benefits (excluding disability and carers benefits) will be up rated by 1 % for three years from April 2013.
State pension will increase by 2.5%.
New tax avoidance legislation will be introduced.
A Business bank will be created to provide finance and support for smaller businesses.

For full details see 2012 Autumn Statement

Please contact us if you require further information and assistance.

Filed under: Audit, Budget Report, PAYE, Self Assessment, Tax

Budget 2012

Posted by: edwinsmith on April 30th, 2012

The key announcements in the 2012 Budget are as follows:

PERSONAL TAXATION

Income Tax

From 6 April 2013, the personal allowance for those under 65 will be increased by £1,100 to £9,205. The basic rate limit threshold will also be reduced to £32,245. The personal allowance and basic rate limit will be £41,450.

For 2013-14, the main rates of income tax will be the 20% basic rate, the 40% higher rate and the additional rate which will be reduced from 50% in 2012-13 to 45%.

From 2013-14, the age-related personal allowances will not be increased and their availability will be restricted to people born on or before:

5 April 1948 for the allowance worth £10,500; and
5 April 1938 for the allowance worth £10,660.

People born on or after 6 April 1948 will be entitled to the personal allowance of £9,205 for 2013-14.

For reference, from 6 April 2012, the personal allowance for those under 65 will be increased by £630 to £8,105 and the basic rate limit will be reduced to £34,370 making the level at which higher rate tax is payable £42,475 the same as for 2011/12.

Legislation will be introduced in Finance Bill 2013 to apply a cap on income tax reliefs claimed by individuals from 6 April 2013. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25% of income (or £50,000, whichever is greater) Draft legislation will be published for consultation later this year.

Child Benefit income tax charge

Legislation will be introduced in Finance Bill 2012 that imposes a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year, where either they, or their partner, is in receipt of Child Benefit for the year. This will have effect from 7 January 2013. If both partners have adjusted net income over £50,000, the partner with the higher income is liable for the charge.

The income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.

For the tax year 2012-13, the first year of the charge, the amount of income taken into account will be the full amount of income for 2012-13 and the amount of Child Benefit will be that paid in the period from 7 January 2013 to the end of the tax year. For subsequent years, the full amount of Child Benefit and the income for the year will be taken into account.

Future reduction in National Insurance Contributions limits

From April 2013, the Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for National Insurance contributions will be aligned with the point at which the higher rate tax becomes payable (£41,450).

Company Car Tax rates 2014/15 and onwards

Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre by one percentage point to a maximum of 35 per cent in 2014-15.

In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37 per cent.

From April 2016, the Government will remove the three percentage point diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars.

From April 2015, the five year exemption for zero carbon cars and the lower rate for ultra low emission cars will come to an end as legislated in Finance Act 2009.

The appropriate percentage for zero emission and all low carbon cars emitting less than 95g of carbon dioxide per kilometre will be 13 per cent in 2015-16, and will increase by two percentage points in 2016-17.

Company Car Fuel Benefit Charge 2012/13

Employees and directors who are provided with a company car and who also receive free fuel from their employers are subject to the fuel benefit charge. The cash equivalent of the taxable benefit is determined by multiplying a set figure (currently £18,800) by the appropriate percentage for the car, based on its CO2 emissions (grams per kilometre). This will be increased to £20,200 with effect from 6 April 2012. The multiplier will increase by two per cent above the rate of inflation (based on RPI) in 2013-14.

Van Fuel Benefit Charge 2012/13

The van fuel benefit charge multiplier will be frozen at £550, and will increase by inflation in 2013-14.

Employer Asset-backed Pension Contributions

On 29 November 2011 and 22 February 2012, the Government announced that legislation, effective from the respective dates of the announcement, would be included in Finance Bill 2012 to remove any unintended, excessive tax relief arising from asset-backed contributions.

The Government published on 29 March, as part of the draft Finance Bill 2012, related changes to the structured finance legislation and anti-avoidance provisions to recover relief when employers cease to be chargeable to tax or when a person will be placed in a more advantageous tax position as a result of the application of the revenue protection rules published in February. These changes will be effective from 21 March 2012. Relieving or clarifying changes to the February legislation, effective from 22 February, will also be introduced under the Finance Bill 2012.

Qualifying Recognised Overseas Pensions Schemes (QROPS)

The rules on transferring pension funds from a UK registered pension scheme to an overseas pension scheme are changing from 6 April 2012.

There are new conditions that a pension scheme must meet to be a Qualifying Recognised Overseas Pension Scheme (QROPS). There are also new information and reporting requirements and shorter reporting time limits. These changes will affect:

an individual transferring their pension savings
a UK registered pension scheme making a transfer to a QROPS
a QROPS that receives or has received a transfer from a UK scheme.

CAPITAL TAXATION

Capital Gains Tax Annual Exempt Amount

The annual exempt amount for capital gains tax remains £10,600 for 2012-13.

As previously announced in the 2011 Budget, legislation will be introduced in Finance Bill 2012 to uprate the CGT annual exempt amount in line with rises in the CPI instead of the retail prices index. The first year to be affected will be 2012/13. Parliament will still be entitled to override automatic indexation and set a different figure.

Stamp duty land tax (SDLT): rate in respect of residential property where consideration over £2 million

Legislation will be introduced in Finance Bill 2012 to charge SDLT at 7 per cent of the chargeable consideration where this is more than £2 million. The measure takes effect for transactions where the effective date (normally the date of completion) is on or after 22 March 2012.

Stamp duty land tax: enveloping of high value residential properties

The government will introduce legislation in Finance Bill 2012 to apply a 15 per cent rate of SDLT to residential properties over £2 million purchased by certain non-natural persons. This will take effect from 21 March 2012. In addition, the government will introduce paving legislation for an annual charge.

Inheritance tax allowance

There have been no changes to the inheritance tax nil rate band, being £325,000, and it will continue to be frozen until April 2015. The Government previously announced that from 2015-16 the consumer prices index will be used as the default indexation assumption.

The Government has also previously announced in the 2011 Budget that a reduced rate of inheritance tax (IHT) will apply where 10 per cent or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the current 40 per cent rate will be reduced to 36 per cent. The new rate will apply where death occurs on or after 6 April 2012. The Government will be consulting on the detailed implementation of this measure and will issue a consultation document before the summer.

BUSINESS TAXATION

Corporation tax

The corporation tax rates for the financial year commencing 1 April 2012 will be reduced to the following rates:

	Profits	Rate
Main rate	In excess of £1,500,000	24%
Small Profits rate	Below £300,000	20%

An extra 1% reduction was made to the main rate of corporation tax that was previously stated.

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 22%.

Tax simplification for small businesses

Following the Office of Tax Simplification review of small business taxation, the government will consult on introducing a voluntary cash basis for unincorporated businesses up to the VAT registration threshold, with a view to introducing legislation in Finance Bill 2013. It will also consult on a simplified expenses system for business use of cars, motorcycles and home. Finally, the government will also consult on proposals to introduce a disincorporation relief. The consultation will look at the potential demand for such a relief as well as the practicalities of how it would work.

Seed Enterprise Investment Scheme (SEIS)

As announced in the Autumn Statement 2011, legislation will be included in Finance Bill 2012 to introduce a new Seed Enterprise Investment Scheme. Following consultation, changes have been made to the legislation to allow companies:

to qualify if they have subsidiaries
to determine eligibility by reference to the age of any trade rather than to the age of the company
to remove reference to the holdings of other entities in calculating asset and employee tests
to allow previous (but not current) employees to qualify
to allow directors who have qualified under SEIS to continue to qualify under EIS, subject to time limits.

Patent box

Legislation will be introduced in Finance Bill 2012 to allow companies to elect to apply a 10 per cent Corporation Tax rate to a proportion of profits attributable to patent and certain other qualifying intellectual property from 1 April 2013. In the first year this proportion will be 60 per cent and increase annually to 100 per cent from April 2017.

Corporation Tax relief’s for the creative sector

The government will introduce Corporation Tax relief’s for the production of culturally British video games, television animation programmes and high-end television productions. Consultation on the design will take place over the summer. Legislation will be in Finance Bill 2013 and will take effect from 1 April 2013, subject to State aid approval.

VAT

Registration and deregistration limits

From 1 April 2012, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £77,000 (currently £73,000). The de-registration threshold will increase to £75,000 (currently £71,000).

The registration and deregistration threshold for relevant acquisitions from other

EU Member States will also be increased to £77,000 (currently £73,000).

Fuel Scale charges

Fuel scale charges will be revised effective from 1 May 2012. These will be published on our news feed.

Addressing Borderline Anomalies

The government has announced changes to address some anomalous VAT borderlines. The changes either marginally extend VAT at the standard rate to these areas or confirm the current standard rated treatment.

This consultation invites comments on draft legislation changing the VAT treatment of supplies of catering, sports drinks, self storage, hairdressers' chair rental, holiday caravans and alterations to listed buildings.

HMRC would like to hear from businesses involved in the manufacture and retail of affected goods or the provision of affected services; consumers affected by the changes and tax practitioners.

CHARITABLE GIVING

Gift Aid for Charitable Companies and Community Amateur Sports Clubs

From 6 April 2012 charitable companies and Community Amateur Sports Clubs (CASCs) will be able to make claims for repayment of Gift Aid outside a tax return.

Also, CASCs will be able to reclaim tax under gift aid retrospectively from 1 April 2010 in relation to gift aid and 6 April 2010 in relation to claims.

EXCISE DUTY

From 6pm on Wednesday 21 March 2012 the following changes will take effect:

- Tobacco duty – 5% above the rate of inflation (hand rolling tobacco – additional 10%)

The following increases are effective from 26 March 2012:

- Alcohol duty – 2% above inflation

A document containing the tax rates applying for 2012-13 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2012 Budget in more detail or to apply any changes to your specific circumstances.

Filed under: Budget Report

Budget 2012

Posted by: edwinsmith on March 22nd, 2012

Below are the 2012 Budget highlights.

Personal allowance to be increased to £9,205 in 2013/14, and the higher rate threshold reduced by £1,025 to £41,450.
Age allowance to be frozen from 2013/14 and then phased out.
Limit on maximum amount of income tax reliefs that can be claimed from 2013/14.
Additional rate of income tax reduced to 45% from 2013/14.
7% SDLT rate for residential properties valued at over £2 million and new measures to counter ownership through corporate entities.
No changes to main pensions tax reliefs.
Restrictions on the tax relief available on benefits from regular premium life assurance policies.
Child benefit to be phased out where income is over £50,000.
Corporation tax main rate cut to 24% from April 2012 and to 22% by April 2014.
Voluntary cash basis based on turnover for tax on profits of small unincorporated businesses. In consultation but likely to start from 6 April 2013.
An increase from £120,000 to £250,000 in the individual grant limit for EMI schemes.
A further tightening of the car benefit rules through to 2016/17.

Please contact us if you would like to know more. However, a more detailed analysis will be published soon.

Filed under: Budget Report

Budget 2011 key announcements

Posted by: edwinsmith on March 24th, 2011

The key announcements in the 2011 Budget are as follows:

PERSONAL TAXATION

Income Tax

From 6 April 2012, the personal allowance for those under 65 will be increased by £630 to £8,105. The basic rate limit threshold will also be reduced by the same amount to £34,370.

All other income tax personal allowances and limits that are subject to indexation will be increased in line with the retail prices index in 2012.

For reference, from 6 April 2011, the personal allowance for those under 65 will be increased by £1,000 to £7,475 and the basic rate limit will be reduced to £35,000 making the level at which higher rate tax is payable £42,475 (reducing from £43,875 in 2010/11).

Future increases in National Insurance Contributions rates, limits and thresholds

From 2012/13 the Consumer Prices Index (CPI) will replace the Retail Prices Index (RPI) as the default indexation for all National Insurance contributions rates, limits and thresholds:

- Class 1 lower earnings limit and primary threshold (the point at which employees pay NIC);

- Class 2 small earnings exception;

- Class 4 lower profits limit; and

- Rates of Class 2 and 3.

The secondary threshold (the point at which employers pay NIC on the employees salary) will be over-indexed when compared to CPI and will continue to rise by the equivalent of RPI from April 2012 until 2015/16.

NIC rate

From 6 April 2011, the government previously announced that the NIC rate would be increased by 1% to 12% for employees earnings. The employer rate will be increasing by the same amount to 13.8%.

Company Car Tax rates 2013/14

From April 2013, the appropriate percentages used to multiply against a cars list price when calculating the company car benefit for employees and directors will be increased by one per cent for all vehicles with carbon emissions between 95g and 220g from April 2013. Zero emissions cars will remain at zero per cent and ultra low emissions cars with emissions up to 75g will remain at five per cent.

Company Car Fuel Benefit Charge 2011/12

Employees and directors who are provided with a company car and who also receive free fuel from their employers are subject to the fuel benefit charge. The cash equivalent of the taxable benefit is determined by multiplying a set figure (currently £18,000) by the appropriate percentage for the car, based on its CO2 emissions (grams per kilometre). This will be increased to £18,800 with effect from 6 April 2011.

Approved Mileage Allowance Payments rates from 2011/12

Employees who use their own cars for business mileage can claim reimbursement from their employers through the approved mileage allowance payments rates (AMAPs). Payments up to these rates are not regarded as a taxable benefit. There is currently a higher rate of 40p per mile for the first 10,000 miles of business use and 25p per mile thereafter.

The higher rate will be increased to 45p per mile with effect from 6 April 2011.

Combination of Income Tax and National Insurance?

The Government will consult on the options, stages and timing of reforms to integrate the operation of income tax and National Insurance contributions (NICs). In exploring potential reforms the Government aims to remove distortions created by the tax system, reduce burdens on business and improve fairness for individuals. Any change will be complex and involve a wide range of policy and implementation issues. A consultation document will be published later this year setting out the differences in the current income tax and National Insurance systems, and options to address these. The Government has stated that it will not extend NICs to individuals above State Pension age or to other forms of income such as pensions, savings and dividends.

Review of non-domicile taxation

To encourage inward investment into the UK, the Government intend to introduce the following reforms:

- removing the tax charge when non-domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses;

- simplifying some aspects of the current tax rules for non-domiciles to remove undue administrative burdens; and

- increasing the existing £30,000 annual charge to £50,000 for non-domiciles who have been UK resident for 12 or more years and who wish to retain access to the beneficial tax regime (the remittance basis). The £30,000 charge will be retained for those who have been resident for at least seven of the past nine years and fewer than 12 years.

The Government will be issuing a consultation document in June and subject to the consultation intends to implement these reforms from April 2012.

CAPITAL TAXATION

Capital Gains Tax Annual Exempt Amount

The annual exempt amount for capital gains tax will be increased in line with statutory indexation to £10,600 with effect from 6 April 2011.

Legislation will be introduced in Finance Bill 2012 to uprate the CGT annual exempt amount in line with rises in the CPI instead of the retail prices index. The first year to be affected will be 2012/13. Parliament will still be entitled to override automatic indexation and set a different figure.

Entrepreneurs’ relief

From 6 April 2011, the lifetime limit on gains qualifying for entrepreneurs' relief will increase from £5 million to £10 million. There are no other changes to the rules or conditions relating to entrepreneurs' relief.

Enterprise Investment Scheme/Venture Capital Trusts

Subject to state aid approval, from 6 April 2011, the rate of income tax relief given under the Enterprise Investment Scheme (EIS) will be increased from 20 per cent to 30 per cent.

In addition (also subject to state aid approval), the following changes will be made from 6 April 2012:

- an increase in the thresholds for the size of qualifying company for both EIS and VCTs to fewer than 250 employees and to the company having no more than £15million of gross assets before the investment;

- an increase in the annual amount that can be invested though both EIS and VCTs in an individual company to £10million; and

- an increase in the annual amount that an individual can invest under EIS to £1million.

Stamp duty land tax (SDLT) reform of rules for bulk purchases

Legislation will be introduced in Finance Bill 2011 to provide a relief for purchasers of residential property who acquire interests in more than one dwelling. Where the relief is claimed the rate of SDLT is determined not by the aggregate consideration but instead is determined by the mean consideration (i.e. by the aggregate consideration divided by the number of dwellings) subject to a minimum rate of one per cent.

Inheritance tax allowance

The inheritance tax nil rate band is frozen until April 2015. The Government has announced that from 2015/16 the consumer prices index will be used as the default indexation assumption.

The Government has announced that a reduced rate of inheritance tax (IHT) will apply where 10 per cent or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the current 40 per cent rate will be reduced to 36 per cent. The new rate will apply where death occurs on or after 6 April 2012. The Government will be consulting on the detailed implementation of this measure and will issue a consultation document before the summer.

BUSINESS TAXATION

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	26%
Small Profits rate	Below £300,000	20%

An extra 1% reduction was made to the main rate of corporation tax that was previously stated in the post election Budget 2010.

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 23%.

Capital allowances on plant and machinery

Previously stated: The capital allowance rates will be reduced with effect from 1 April 2012 (for Corporation Tax) or 6April 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

Capital allowances – short life assets

Legislation will be introduced to enable businesses incurring expenditure on an item of plant or machinery from April 2011 onwards to make a short life asset election in respect of that item if they expect to sell or scrap it within an eight-year cut-off period. This is an extension from the current four year period.

Extend small business rate relief (SBRR) holiday

The SBRR holiday will be extended by one year from 1 October 2011.

Time to pay

This will continue through HMRC’s Business Payment Support Service to provide advice and time to pay to viable businesses experiencing temporary financial difficulty. The service is available for all HMRC taxes, including VAT, corporation tax, income tax and NIC’s (PAYE).

Research and Development tax credits

Subject to State aid approval, legislation will be introduced to increase the rate of the additional deduction for expenditure on research and development (R&D) for companies that are small or medium sized enterprises (SMEs) from 75 per cent to 100 per cent from 1 April 2011, giving a total deduction of 200 per cent. The rate of vaccine research relief for SMEs will be reduced to 20 per cent from the same date.

Following consultation from November 2010 to February 2011 on the support that the research and development (R&D) tax reliefs provide to innovation, and on the recommendations of the Dyson review, the Government will publish a response in May.

The response will include further consultation on the detail of proposed changes. Subject to State aid approval and to this consultation, legislation will be introduced in Finance Bill 2012 as follows:

- the rule limiting a company’s payable R&D tax credit to the amount of PAYE and National Insurance contributions (NICs) it pays will be abolished;

- the £10,000 minimum expenditure condition will be abolished for all companies; and

- changes will be made to the rules governing the provision of relief for work done by subcontractors under the large company scheme.

Again, subject to State aid approval, the rate of the additional deduction for expenditure on research and development (R&D) for companies that are small or medium sized enterprises (SMEs) will be increased by a further 25 per cent to give a total deduction of 225 per cent from 1 April 2012. Vaccine Research Relief will not be available for SMEs from the same date.

Business premises renovation allowance

The Government has confirmed it will extend the business premises renovation allowance for a further five years from 2012.

Real estate investment trusts (REITs)

The Government will commence an informal consultation with the industry and the representative body on the REITs legislation shortly after the Budget. Subject to the responses the Government will make changes both to reduce the barriers to entry and investment and to reduce the regulatory burden for existing and future REITs. The proposed legislation will be included in Finance Bill 2012.

VAT

Registration and deregistration limits

From 1 April 2011, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £73,000 (currently £70,000). The de-registration threshold will increase to £71,000 (currently £68,000).

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased to £73,000 (currently £70,000).

Fuel Scale charges

Fuel scale charges will be revised effective from 1 May 2011. These will be published on our news page on our website when released.

Low Value consignment relief

The threshold at which low value items can be imported from outside the EU VAT-free will be reduced from £18 to £15 effective from 1 November 2011.

CHARITABLE GIVING

Charity benefits

From April 2013 charities (and community amateur sports clubs) that are registered with HMRC for Gift Aid purposes will be able to apply for a gift aid style repayment on small donations of £10 or less without the need to obtain gift aid declarations from the donors, up to a maximum of £5,000 in donations per year, per charity.

In 2012/13 HMRC will introduce a new online system for charities to register their details for gift aid and to make gift aid claims.

EXCISE DUTY

From 6pm on Wednesday 23 March 2011 the following changes will take effect:

- Fuel duty – reduction of 1 pence per litre on unleaded petrol and diesel

- Tobacco duty – 2% above the rate of inflation (hand rolling tobacco – additional 10%)

The following increases are effective from 28 March 2011:

- Alcohol duty – 2% above inflation (an additional rate for high strength beers and reduced rate for low strength beers will also come into effect).

From 1 April 2011, Vehicle Excise Duty rates will increase in line with RPI inflation and Heavy Goods Vehicle rates will be frozen.

A document containing the tax rates applying for 2011/12 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2011 Budget in more detail or to apply any changes to your specific circumstances.

Filed under: Budget Report

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 6April 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

Emergency Budget 2010 – 22 June

Posted by: edwinsmith on May 17th, 2010

Chancellor George Osborne has confirmed that an emergency Budget will be held on Tuesday 22 June 2010.

Filed under: Budget Report

Budget 2010

Posted by: edwinsmith on March 24th, 2010

Budget Report 2010 main points in summary:

Income Tax

basic rate will remain at 20%
higher rate will remain at 40%
additional rate will be set at 50%

The basic rate limit will remain at £37,400 and the starting rate limit for savings will remain at £2,440. The personal allowances will remain at their 2009-10 amounts.

From 2010/11 the amount of the personal allowance will be gradually withdrawn for all individuals (regardless of age) with "adjusted net incomes" above £100,000. The rate of reduction is £1 for every £2 above the income limit.

National Insurance

All NICs rates and thresholds are unchanged, except for two areas which are:

the Lower Earnings Limit (LEL) which is linked to the basic State Pension will increase by £2 from £95 per week to £97 per week; and
the special Class 2 rate for Volunteer Development Workers will increase by 10p from £4.75 per week to £4.85 per week, because this is linked to the LEL.

For 2011/12, in addition to the 0.5% increases already announced at PBR 2008:

the main rates of Class 1 and Class 4 NICs will be increased by a further 0.5 per cent to 12 per cent and 9 per cent respectively;
the employer rate for both Class 1A and 1B contributions will be increased by a further 0.5 per cent to 13.8 per cent;
the additional rate of Class 1 and 4 NICs will be increased by a further 0.5 per cent to 2 per cent; and
the primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band will be frozen at its current level of £325,000 up to and including tax year 2014/15.

Capital Gains Tax

No change in the Capital Gains Tax rate of 18%.

Entrepreneurs relief increasing to £2 million from 6 April 2010.

Annual exemption of £10,100 remains the same.

Pensions

The 2010/11 Lifetime Allowance of £1.8 million and Annual Allowance of £255,000 will continue to apply at these levels for a further five tax years.

As announced at Budget 2009 there will be restricted tax relief on pensions savings with effect from 6 April 2011 for people with income of £150,000 or over but below £180,000 (although individuals with pre-tax income of between £130,000 to £150,000 may be caught by the legislation). The tax relief on pension contributions (including the value of employer contributions for those in employment) will reduce gradually from marginal rate to basic rate as income increases. Where income is £180,000 or over, tax relief on pension contributions will be restricted to basic rate. For the anti forestalling rules please refer to our previous news article 'Maximising tax relief on pension contributions – Special Annual Allowance'.

Stamp Duty Land Tax (SDLT)

On or after 25 March 2010 and before 25 March 2012 first time buyers will not pay any Stamp Duty Land Tax (SDLT) for property purchased up to £250,000.

A new SDLT rate of 5% will apply to residential property purchases for over £1 million on or after 6 April 2011.

Savers

As announced at Budget 2009, from 6 April 2010 the annual ISA investment limit for every adult is £10,200, up to £5,100 of which can be saved in cash.

VAT

The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010.

The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.

Corporation Tax

For the Financial Year commencing 1 April 2010 the small profits rate of Corporation Tax remains at 21%.

The marginal relief fraction remains at 7/400ths for all profits.

For the Financial Year commencing 1 April 2010 the main rate of Corporation Tax remains at 28%.

Annual Investment Allowance (AIA)

The AIA from 1 April 2010 (for Corporation Tax) or 6 April 2010 (for Income Tax) will double to £100,000.

Please contact us at Edwin Smith if you would like to discuss the Budget Report 2010 in more detail.

Filed under: Budget Report

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