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.
