2011 Tax Cards

Rigby Lennon & Co 2011 Budget Review

Overview

  • 1st “Ordinary” budget
  • Limited options-fiscally neutral
  • No new tax rises
  • Strong pro growth agenda
  • But 2011 downgraded from 2.1% to 1.7%
  • Forecast 2.35% through 2013
  • Optimistic ??

Income Tax Rates Unchanged

  • Rates Unchanged
  • 2011/12 Personal Allowance- £7475 an increase of £1000 (£8105 for 2012/13)
  • 2011/12 Basic Rate Band reduced to £35000 (2012/13 – £34370)
  • Higher Rates as previously announced

Corporation Tax

  • Main rate 26% reducing to 23% (by 2014)
  • Small Companies 20%
  • Effective marginal rate = 27.5%
  • Applies to Profits over £300k and less than £1.5m

Corporation Tax & Businesses

  • Capital Allowances – Main rate 20% reducing to 18% (by 2012)
  • Cars – 10% reducing to 8% (2012)
  • Annual Investment Allowance-£100k down to £25k (2012)
  • De-pooling of P&M

Capital Gains Tax

  • Annual Exemption- £10600 in line with RPI- in future – CPI
  • Rates – 10%, 18% & 28%
  • 28% applies where taxable income & gains are over £35000

Capital Gains Tax Continued

Entrepreneurs’ Relief

  • Lifetime limit increased to £10m (£5m to 06/04/2011)
  • Where £5m used pre 06/04/2011-additional £5m available.
  • Balance of £10m available for others re disposals post 06/04/2011
  • Relief originally worth £80k (8% differential on £1m)
  • Relief now potentially £1.8m (18% differential on £10m)
  • Assets must qualify
  • Need for long term planning

Value Added Tax

  • Standard rate 20%
  • Reduced rate 5%
  • Registration threshold – £73000
  • De-Registration threshold – £71000
  • Threshold for annual & cash accounting – £1.35m
  • Please Note: VAT fuel scale charges
  • Online Registration & Online Filing- Mandatory from 01/04/2012

Other Issues

  • National Insurance
  • Inheritance Tax
  • Pensions
    • Annual Allowance- £50000
    • Lifetime Allowance £1.5m
  • Approved Mileage Rates- 45p!!
  • EIS & VCTs
  • Furnished Holiday Lettings
  • R & D Tax Credits
  • Gift Aid
  • Company Cars
    • Continued tinkering with CO2 bands
    • Fuel Benefit- now based on £18800

Final Comment

In summary a bold attempt to encourage growth, lessen the demands of the public sector and restore an emphasis on manufacturing and exports. It remains to be seen if China and the other Tiger economies will have the last word.

Main Income Tax reliefs

allowed at top rate of tax 2011/12 20010/11
personal allowance £7,475 £6,475
personal allowance (65-74)* 9,940 9,490
personal allowance (75 and over)* 10,090 9,640
blind person’s allowance 1,980 1,890
Personal allowances in 2011/12 are withdrawn at £1 for every £2 by which total income exceeds £100,000.

allowed only at 10%

married couple’s allowance*
(only available if born before 6th April 1935)
7,295 6,965
income limit for age-related allowances 24,000 22,900
 
* Age allowances are reduced £1 for every £2 by which income exceeds the income limit, until the age allowance is reduced to the normal allowance. Personal allowance is reduced before married couple’s allowance. MCA is reduced to a minimum of £2,800 (2010/11: £2,670).

Income Tax Rates and bands

2011/12 2010/11
starting rate on band * (SRB) 2,560 2,440
basic rate band (BRB) 35,000 37,400
higher rate band (HRB) 35,001-150,000 37,400-150,000
Additional Rate over 150,000 over 150,000
* SRB is within BRB and applies to savings income only. If taxable general income exceeds the SRB, the 10% rate is not available for savings income.
Tax rates
rates differ for general/interest/dividends
2011/12
G S D
starting rate n/a 10% 10%
basic rate 20% 20% 10%
higher rate 40% 40% 32.5%
Additional Rate 50% 50% 42.5%
General income (salary, pension, profit, rent) uses lower rate bands first, then savings (interest), then dividends. Discretionary trusts: basic rate as above applies to the first £1,000 of income, then additional rate.

Car Benefit Assessment

Charge based on a percentage of the initial list price of the car, including accessories, delivery charges and VAT. The percentage depends on the carbon dioxide emissions rating of the car, and whether the engine runs on petrol or diesel. The taxable benefit on an electric car (no emissions) is nil.

ratings petrol diesel
1-75g/km 5% 8%
76-120g/km 10% 13%
121-125g/km 15% 18%
over 130g/km +1% for each extra 5g/km (135,140 etc.)
Maximum 35% 35%
Special rules apply to older cars which do not have a CO2 rating.
Employee contributions for private use are deducted from the taxable figure.
Company vans are charged at £3,000 if private use is more than home-to-work travel. An additional amount of £550 is charged if fuel is provided free for private use. There is no taxable benefit on an electric van.

car fuel benefit

The benefit of free fuel for private use in a company car is calculated using the same percentage as that used for the car benefit, applied to a standard figure of £18,000 (2009/10: £16,900). The taxable amount is therefore between £900 (min) and £6,300 (max).

Tax Free Mileage Allowances

higher rate lower rate
2011/12
all cars 45p 25p
motorcycles 24p 24p
bicycles 20p 20p
business passengers 5p 5p
Higher rate (which was 40p for cars in 2010/11) is allowed up to 10,000 business miles.
fuel-only allowances for company cars
petrol diesel lpg
From 1.3.2011 (From 1.12.2010)
up to 1400cc 14p (13p) 13p (12p) 10p (9p)
1401 – 2000cc 16p (15p) 13p (12p) 12p (10p)
over 2000cc 23p (21p) 16p (15p) 17p (15p)
These figures usually change on 1 June and 1 December each year.

National Insurance Contributions

class 1 (employees)
contracted in contracted out
salary related money purchase
employee contributions
– on earnings between £139.01 – £770pw 12.0% 10.4% 10.4%
– on earnings between £770 – £817pw 12.0% 12.0% 12.0%
– on earnings above £817pw 2.0% 2.0% 2.0%
employer contributions
– on earnings between £136.01 and £770pw 13.8% 10.1% 12.4%
– on earnings above £770pw 13.8% 13.8% 13.8%
Employer contributions (at 13.8%) are also due on most taxable benefits and on tax paid on an employee’s behalf under a PAYE settlement agreement.
class 2 (self-employed)
flat rate per week £2.50
small earnings exception: profits per annum £5,315
class 3 (voluntary)
flat rate per week £12.60
class 4 (self-employed)
on profits £7,225 – £42,475 9.0%
on profits over £42,475 2.0%
From September 2010, there is a “holiday” from employer’s NIC for new businesses employing up to 10 new employees (including directors) in their first year. The maximum benefit is £5,000 per employee. Businesses in certain areas, such as London and the SE, are excluded.

Pension Contributions

maximum annual tax efficient gross contributions to age 75
– individuals £3,600 or 100% of earnings to £50,000
– employers £50,000 less employee contributions
Maximum tax efficient fund on taking benefits in 2011/12: £1.8m
Only current earnings count for the 100% limit. Most personal pension contributions are paid net of basic rate tax. Extra contributions above £50,000 may use unused £50,000 limit of preceding three years.

Inheritance Tax

charges on or after 6th april 2009 rates %
0 – £325,000 nil Nil band frozen
above £325,000 40% until 2014/15
Lifetime chargeable transfers at half the death rate, ie 20%.
Business property relief of 100% for all shareholdings in qualifying unquoted trading companies and for most unincorporated trading businesses; agricultural property relief at 100% for qualifying holdings of agricultural land.
Annual exemption for lifetime gifts £3,000.
Small gifts – annual amount per donee £250.
Tapering relief applies to reduce the tax on transfers within 7 years of death. The reduction in tax is 20% for survivorship of 3-4 years, 40% for 4-5 years, 60% for 5-6 years and 80% for 6-7 years.

Important Annual Limits

2011/12 2010/11
Individual Savings Account investment £10,680 £10,200
Enterprise Investment Scheme investment **500,000 *500,000
Venture Capital Trust investment **200,000 **200,000
* Relief at 20% ** Relief at 30%
** From 6.10.09, £10,200 for those aged 50+.

Value Added Tax

Standard rate (1/6 of VAT-inclusive price) 20%
registration level from 1.4.11 £73,000 per annum
deregistration level from 1.4.11 £71,000 per annum
scale charges
The scale charges for private use of business fuel are based on the CO2 emissions rating of the car. A different charge will apply for each 5g/km increase between 130g/km and 230g/km (max). For a 3 month period ending after 30 April 2011:
120 or less £130.83 net £26.17 vat
130 210.00 net 42.00 vat
rising per 5g/km by approx* 13.10 net 2.62 vat
225 or above 459.17 net 91.83 vat
* exact figures must be obtained from full table.

Capital Gains Tax

Capital Gains Tax

Annual exempt amount 2011/12: individuals £10,600, most trustees £5,300. An individual’s net gains after all reliefs, losses and annual exempt amount are added to income and taxed at 18% (basic rate band) and 28% (higher rate band). For trusts, the CGT rate is 28%.

Entrepreneurs’ relief

For disposals of sole trade or interest in a partnership trade, or shares in a trading company by an officer or employee owning at least 5%, the gain (up to the lifetime allowance) is taxed at a 10% rate of CGT. The lifetime limit is £10m from 6.4.11 (previously £5m from 23.6.10-5.4.11; £2m from 6.4.10 – 22.6.10, £1m pre- 6.4.10).

Corporation Tax

Year to 31.3.2012 31.3.2011
main rate 26% 28%
profits above £1.5m £1.5m
small companies rate 20% 21%
profits upto £300k £300k
small/large marginal band £300k – £1.5m £300k – £1.5m
fraction (effective rate) 3/200 (27.50%) 7/400 (29.75%)

Main capital allowances

allowance %
plant and machinery
– annual investment allowance £100,000* 100
– certain energy efficient plant, including low emission cars 100
– writing down allowance: general pool 20
– writing down allowance: special rate pool 10
*will fall to £25,000 on 1.4.12 (companies) or 6.4.12 (income tax traders); WDA fall to 18%/8% at same date.
The special rate pool includes long life assets, integral plant in buildings, thermal insulation and cars with CO2 emissions over 160g/km. The general pool contains other plant and machinery.
The old system of cheap/expensive cars has been abolished, but transitional rules cover existing expenditure before April 2009.

Stamp Duty & Stamp Duty Land Tax

rates on sales % of total consideration
shares and marketable securities (nil if value up to £1,000) 0.5%
land 0 – threshold nil
threshold – £250,000 1%
£250,001 – £500,000 3%
£500,001 and over (all properties) 4%
Over £1M (residential from 6.4.2011) 5%
The threshold is:
£125,000 general residential property
£150,000 residential in “disadvantaged areas”
£150,000 commercial property
For the two years to 24.3.2012, first time buyers can claim relief from SDLT on purchases of up to £250,000 for property they intend to live in.

Earliest due dates for payment of tax

income tax
employment most tax paid under paye
interest, dividends lower/basic rate liability usually settled before receipt
untaxed sources, plus balance on employment and higher rates on investment income (self assessment) Payments on account for 2011/12 on 31.1.12 and 31.7.12 based on 2010/11 tax; balance due 31.1.13 with first instalment for 2012/13.
capital gains tax 31 january following the tax year.
inheritance tax normally 6 months after month of death.
corporation tax Large companies pay by instalments starting 6 1/2 months through the accounting period; small/medium companies pay 9 months and 1 day after end of period.