Budget 2011

VAT

VAT changes without prior notice were:

  • Registration limit rises to £73,000 from 1 April 2011;
  • Deregistration limit to £71,000 from 1 April 2011;
  • Fuel scale charges will change from 1 May 2011.

In addition, the Low Value Consignment Relief threshold will be reduced to £15 from 1 November 2011.

The following items are scheduled for legislation in the Finance Bill 2012:

  • Diplomatic privilege reliefs will be enabled so that secondary legislation can be used to replace the current ESCs;
  • The VAT Grouping ESC will be put into legislation;
  • VAT status of public bodies to bring UK legislation into line with EU agreements –consultation is expected in Autumn 2011; and
  • Tackling VAT fraud on imported road vehicles.

 

Online VAT returns

Any businesses that are currently filing VAT returns on paper (those with turnovers of less than £100,000), will have to file online and pay electronically from 1 April 2012.

 

Personal Tax

Income Tax bands and personal allowance

All Income Tax rates for 2011/12 will remain at their 2010/11 levels. The personal allowance will go up to £7,475 while the basic rate band will drop £2,400 to £35,000. In 2012/13, the personal allowance is set to go up to £8,105 based on current inflation assumptions, with a corresponding decrease in the basic rate limit, leaving the effective higher rate threshold unchanged at £42,475 (i.e. £8,105 + £34,370).

National insurance rates and bands

The main and additional rates of National Insurance contributions (NICs) will increase by 1 percent from 6 April 2011 as previously announced. The primary threshold for employees will increase to £139 a week and the secondary threshold for employers will increase to £136 a week.

Furnished holiday lettings

From April 2011, new tax rules for furnished holiday lettings will take effect, so that loss relief may only be offset against income from the same business. The letting and availability thresholds will be increased from April 2012. From that date the following changes will take effect:

  • The minimum period for which a holiday property must be available for letting will increase from 140 to 210 days.
  • The minimum period for which the property must be actually let to members of the public will be increased from 70 to 105 days.

 

Approved mileage allowance payments (AMAPs)

The allowance employers can pay tax-free to employees who use their own cars for business will go up from 40p a mile to 45p from 6 April 2011 for the first 10,000 miles in a tax year to stay as it is. The 5p passenger allowance will be extended to volunteers.

 

Fuel benefit charge

The benefit charge on having free fuel for a company car is found by multiplying the percentage used for working out the car benefit by a fixed figure. In 2011/12 it will rise to £18,800.

 

Company vans

There is no charge to the taxation of company vans. The benefit charge stays at £3,000 (plus £500 if free fuel is provided).

 

Capital Tax

Capital Gains Tax (CGT) annual exemption

The annual exemption will increase in line with statutory indexation to £10,600 for 2011/12. From 6 April 2012, the annual exemption will be indexed by reference to the CPI instead of the RPI.

 

CGT entrepreneurs’ relief

The lifetime limit on gains qualifying for entrepreneur’s relief will rise from £5 million to £10 million from 6 April 2011. Qualifying gains are taxed at 10 percent rather than 18 percent or 28 percent. This further extension in the scope of entrepreneurs’ relief is very substantial, and follows the increase in the limit of relief to £5 million which occurred shortly after the Coalition Government was elected.

 

Inheritance Tax (IHT)

The IHT nil-rate band will be indexed by reference to the CPI instead of the RPI from 6 April 2015. Until then it is frozen at £325,000.

 

Business Tax

Corporation Tax rates

12 months to March 2012

  • Small companies rate for profits up to £300,000: 20 percent (as opposed to the current 21 percent).
  • Marginal rate for profits between £300,000 and £1.5m: 27.5 percent (as opposed to the current 29.75 percent).
  • Main rate for profits over £1.5m: 26 percent (as opposed to the current 28 percent).
  • The main Corporation Tax rate will reduce by 1 percent a year over the next three years to 23 percent.

 

Get the timing right for investment in new business equipment

At present, businesses of any size can generally write off (for tax) the first £100,000 of expenditure on equipment, but from April 2012 this will fall to £25,000. Businesses may want to bring forward equipment expenditure.

 

Charities

Gift Aid

Donors will be able to receive benefits valued up to £2,500 as a result of making a donation to a charity of more than £10,000 under gift aid. However, the benefit must not exceed five percent of the gift. The measure has effect for individual donations from 6 April 2011 and for corporate donations from 1 April 2011.

 

Financial Planning

ISA limits

The limit for 2011/12 is as follows: £10,680 of which up to £5,340 can be saved in cash. From April 2012, CPI rather than RPI will be used as the default assumption for the indexation of the ISA limits.

 

Junior ISAs

All UK resident children aged under 18 who do not have a Child Trust Fund will be eligible for Junior ISAs, and the accounts are expected to be available from Autumn 2011.