The juggling act: to reduce debt by 2015/16, encourage growth and keep interest rates and unemployment down.

Key measures:

Income tax and National Insurance contributions (NICs)

From: 2011

  • The personal allowance for those aged under 65 will be increased by £1,000 to £7,475 (basic rate taxpayers only).
  • The NICs Upper Earnings and Profits Limit will be aligned with the income tax higher rate threshold
  • The point at which employers start to pay Class 1 NICs, is to be increased by an extra £21 per week above indexation.
  • The higher rate threshold frozen until 2013/14.

Company tax

From: 2011

  • Main rate: reducing to 27% from 2011/12, and then reducing by 1% per year for five years.
  • Small companies rate reduced to 20%.

Capital Gains Tax (CGT)

From: on or after 23 June 2010

  • The CGT rate rises from 18% to 28% for higher rate taxpayers.
  • The rate remains 18 per cent where total taxable gains and income are less than the upper limit of the income tax basic rate band.
  • For trustees and personal representatives of deceased persons, the rate is increased to 28 per cent (previously 18 per cent).
  • Entrepreneurs' Relief lifetime limit increases to £5 million

VAT

From: 4 January 2011

  • The main rate rises to 20%.
  • The Flat Rate scheme rates will be adjusted.
  • There will be anti-forestalling measures.

Furnished Holiday letting (FHL)

From: 2011

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

  • Ensure the FHL rules apply equally to properties in the EEA.
  • Increase the number of days that qualifying properties have to be available for, and actually let as, commercial holiday letting.
  • Change the way in which FHL loss relief is given.

Employment taxes

New employers

From: September 2010

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

Shares and incentives

Enterprise Management Initiatives (EMI)

From: the date of the new Finance Act (around July).

  • A change to the qualifying conditions for companies giving a requirement the company granting EMI options will now be required to have a “permanent establishment” in the UK.

Anti-avoidance

Geared Growth and Employment-Related Securities

From: no date suggested

  • Following the Grey’s Timber decision, a new consultation is announced to consider tax measures (within the employment related securities tax regime) to apply to geared growth arrangements that are used to avoid income tax and NICs.

Anti-avoidance

From: 2011

  • EBTS, EFURBS, TRUSTS etc Employment Income and Pensions Contributions: measures to tackle the use of intermediary structures (such as Employee Benefit Trusts (EBTs) ands Employer Funded Unapproved Retirement Benefit Trusts (ERURBS)) that are created to avoid of tax and National Insurance Contributions (NICs) on earnings and circumvent restrictions on pensions tax relief.

Capital allowances

From: 2010

  • 100% allowance on new zero emission goods vehicles.

From: 2012

  • The rates of writing-down allowances (WDAs) for new and unrelieved expenditure on plant and machinery reduced from 20 per cent to 18 per cent (main rate pool) and from 10 per cent to 8 per cent for special rate pool.
  • The Annual Investment Allowance reduced from £100,000 to £25,000.

  • Pensions

    From: now to 2011

    All change
  • The aim is to find alternative (i.e. less complicated) ways of restricting pensions’ tax relief from 6 April 2011 by reforming the existing pension savings allowances, principally by significantly reducing the annual allowance.
  • Provisional analysis has suggested that the level of a reformed annual allowance may be in the region of £30,000 to £45,000.
  • The reformed allowances would replace the high income excess relief charge, which currently is due to come into force on 6 April 2011.

Pensioners

From: 2011

  • Relinking of basic state pension to earnings.

Tax collection

From: now (2010/11)

  • HMRC will use Debt Collection Agencies during 2010-11 to provide it with additional capacity to pursue and collect tax debts

Also ran:

  • The previously proposed tax relief on VDU games development is abolished (a measure announced in the March Budget).
  • Measures to freeze council tax if councils can make necessary savings.
  • Bank levy from 2011.
  • An overhaul of state benefits includes:
    • Child benefit frozen
    • Major overhaul of Child Tax Credits
    • Tax credits cut for families with income over £40,000
    • Medical assessment for Disability Living Allowances
    • Overhaul on Housing Benefit
    • Freeze on public sector pay
    • Increase in state pension age to 66 years

Please note that we will be updating the site during the course of the next couple of weeks and will keep you updated with our regular SME Tax New Update service.

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