Posted by admin
August - 3 - 2011

Budget Summary 2010 

Changes to the personal allowance, basic rate limit and upper earnings limit for NIC Legislation will be introduced to provide for the following income tax and National Insurance Contributions (NICs) changes for the tax year 2011-12:

• the personal allowance for those aged under 65 will be increased by £1,000 to £7,475;

• the basic rate limit will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance. The exact figure will be confirmed when September’s Retail Prices Index (RPI) is known; • the alignment of the Upper Earnings/Profits Limit (UEL/UPL) with the higher rate threshold (the total of the personal allowance for those aged under 65 and the basic rate limit) will be maintained by reducing the UEL/UPL; and

• the secondary threshold, which is the point at which employers start to pay Class 1 NICs, is to be increased by an extra £21 per week above indexation. Taken together, these measures reduce the tax liability for those on lower incomes and have no impact on most higher rate taxpayers who are employees or self employed and will help employers.

Main Changes to Tax Credits and Child Benefit

• The Government will reduce tax credit eligibility for families with household income above £40,000 from April 2011 and make further changes in 2012-13;

• The Government will increase both withdrawal rates to 41%;

• The Government has announced the removal of a number of elements from the Tax Credits system including the baby element (6 April 2011) and the age 50+ element (6 April 2012);

• The Government will use the Consumer Price Index (CPI) to uprate all of those elements of tax credits due to be uprated by RPI from April 2011. The child element of the Child Tax Credit will increase by £150 above CPI in 2011-12 and £60 above CPI in 2012-13. The rate of Child Benefit will remain at current levels until April 2014, which will help fund increases in the child element of the Child Tax Credit;

• The backdating provisions have been shortened to one month with effect from 6 April 2012 from the current 93 days and amendments will also be made to the income disregard for income increases from 6 April 2011 and an introduction of a disregard for income falls from 6 April 2012; and

• Whilst the Government has chosen to continue with the previously announced decision on Working Tax Credits of the over 60s, they have reversed the March 2010 announcement to increase for those with children aged one or two.

Corporation Tax – Rates

The Chancellor has announced that:

• legislation will be introduced to cut the main rate of corporation tax (CT) to 27 per cent for the Financial Year (FY) commencing 1 April 2011;

• the small profits rate of corporation tax for FY 2011 will be 20 per cent. This will be legislated in Finance Bill 2011; and

• there will be further cuts in the main rate in future years: 26 per cent in 2012-13, 25 per cent in 2013–14, 24 per cent in 2014-15.

Change to the standard rate of VAT The standard rate of VAT will increase to 20 per cent on 4 January 2011.

Zero rated supplies, such as basic foodstuffs, children’s clothing and books; exempt supplies, such as education and health; and supplies subject to VAT at the reduced 5 per cent rate, such as domestic fuel and power, are not affected by this change.

There are no changes to the Cash Accounting or Annual Accounting Scheme.

Anti-forestalling legislation will be included in the Finance Bill 2010 to prevent the 17.5 per cent rate applying to supplies of goods or services that are provided on or after 4 January 2011, subject to certain conditions.

Review of Powers: Excise Compliance Checks

This measure makes changes to the compliance checking framework for excise duties, covering information and inspection powers, record-keeping rules and time limits. It will amend current legislation covering record-keeping, time limits and information and inspection powers.

A first consultation on excise modernisation and compliance checks was published in July 2009. The second consultation, published at the Pre-Budget Report 2009, listed the responses and proposed updating the existing compliance checking framework which is mainly in the Customs and Excise Management Act 1979.

Draft legislation to supplement that consultation was published on 14 January 2010 and a summary of responses to that consultation together with an impact assessment were published on 24 March 2010. A final Impact Assessment is being published today, 22 June 2010.

Pensions – Annual Allowance

The Government has today (22 June 2010) announced 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. The Government will discuss the changes with interested parties but provisional analysis has 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. Legislation will be brought in to allow the high income excess relief charge legislation to be repealed.

Regional Employer NICs Holiday for New Businesses

On 22 June 2010 the Budget Report stated:

‘The Government will shortly announce details of a scheme to help new businesses in targeted areas of the UK that need it most. During a three year qualifying period, new businesses which start up in these areas will get a substantial reduction in their employer National Insurance Contributions (NICs).

Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in 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.

Subject to meeting the necessary legal requirements, the scheme is intended to start no later than September 2010. Any new business set up from 22 June which meets the criteria set out in the forthcoming announcement will benefit from the scheme.’

The countries and regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

Comments are closed.