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June 2010 - Emergency Budget Speech

 

Income tax

After 7 weeks of the coalition government bracing us for higher taxes and lower spending the budget speech was, in the end, not as bad as many people had predicted.

There were some tax rises and inevitable spending cuts but there were some silver linings.

There will be an increase in personal allowance of £1,000 from April 2011 although higher rate taxpayers will not benefit.  It is part of the Liberal Democrats big plan to raise this to £10,000 by the end of the coalition term in office.

The Chancellor announced plans to reform the current tax credit system with the aim to target lower income households over middle earners.

It was also announced that existing Furnished Holiday Letting (FHL) rules will remain in place until April 2011 and that they will consult over the summer about plans to change the tax treatment of FHLs from this date.  One big advantage of these rules are that they allow individuals who generate losses from a rental property which meets the FHL criteria to offset them against other income from that tax year.

National Insurance

The Chancellor held back the gloom by announcing that new businesses outside London and the South East will be entitled to an exemption of up to £5,000 of class 1 employers National Insurance Contributions for up to 10 employees in their first year of business.

The basic NI threshold will increase by £21 per week above indexation but this does little to benefit people earning over £20,000 as the previously announced increase in the NI rate of 1% will still come into effect from April 2011.

Capital Gains Tax

As expected, capital gains tax was an easy target for the Chancellor although the rate increase was less than some people had predicted.

The Chancellor announced that gains for high earning individuals will rise by 10% to 28%, while individuals paying tax at the basic income tax rate will continue to pay 18% on any capital gains.

Entrepreneurs relief has been retained and in fact extended to the first £5m of qualifying gains for any individual lowering the effective rate to 10%.

The annual exemption will remain at £10,100 but is expected to increase with inflation in coming years.

VAT

Again as expected, VAT is set to rise to 20% from 4 January 2011 along with a corresponding rise in insurance premium tax.

Corporation Tax

The Chancellor announced large measures to support companies through the difficult times to come.  Every company will see a reduction in corporation tax of 1% from April 2011, the main rate becoming 27% while the small companies rate will fall to 20%.

In addition, the plan was set out to reduce the main rate of corporation tax by a further 1% per annum until it reaches 24%.

However, with the good comes the bad!  The annual investment allowance which gives companies 100% tax relief on qualifying capital expenditure is being cut from £100,000 to £25,000.  In addition, the writing down allowances that companies receive on capital assets are being reduced by 2% to 18% and 8% for certain items.

Duties

Proposals for a landline duty have been dropped along with the Chancellor announcing that no new duties are proposed on alcohol or tobacco.  In addition, cider drinkers can sleep a little easier now as the proposal to increase duties at 10% above inflation have been dropped!

Please see our special emergency budget tax facts for more information and rates.

 

March 2010 - Budget Speech

 

Income Tax

The Chancellor announced that most of the rates and allowances with remain unchanged for 2010/11.  The main changes he announced were:

- The addition of the 50% tax rate (42.5% for dividends) for individuals earning above £150,000.

- The personal allowance will be gradually withdrawn for those individuals with income in excess of £100,000.

National Insurance

All main rates and bands are remaining static.

Capital Gains Tax

The annual exemptions and rates are remaining static.

The entrepreneurs' relief lifetime allowance has been increased from £1m to £2m.

Corporation Tax, VAT, Stamp Taxes and Inheritance Tax

All main rates and bands are remaining static.

The SDLT thresholds remain static with the exception that first time buyers can claim relief from SDLT on residential purchases of up to £250,000 until 25 March 2012.

The AIA available to companies when purchasing fixed assets has been increased from £50,000 to £100,000.  Effectively this means that the majority of small and medium sized businesses will receive 100% tax relief on capital purchases in the year of purchase.

Supporting Small Businesses and Business Growth

The Chancellor announced his continuing support for small businesses by:

- Temporarily increasing small business rate relief

- Continuing to offer business payment support

- Increasing AIA and ER

 

For more information on the 2010/2011 please visit our tax facts.

December 2009 - Pre-Budget Report

 

National Insurance

From April 2011, the Chancellor announced that national insurance rates will increase by 1%, an increase of 0.5% on what had previously announced.  As a result of this, the main rate of Class 1 and Class 4 will increase to 12% and 9% respectively, while the additional rates will both increase to 2%.

Class 1 secondary (i.e. Employers NI), Class 1A and Class 1B  will increase to 13.8%

Corporation Tax

It was announced that the small companies' rate increase from 21% to 22% due to take effect from April 2010 will be deferred for a further year.  The Chancellor also mentioned that the current business payment support arrangements will be extended indefinitely.

VAT

Although there were suggestions to the contrary, the chancellor announced the the increase to 17.5% from 1 January 2010 will remain.

There have also been several changes made to VAT legislation regarding services to and from other EEA member states.  The rules are more straightforward than previously, however, the disclosure that each company may need to make is increased.

Companies who sell goods to other member states currently have to fill in EC Sales Lists on a calendar quarter basis.  From 1 January 2010, companies will also have to file ESLs for services.  It is still possible to submit these quarterly, but if the value of intra-community trade exceeds £70,000 in the current quarter, or any of the previous four quarters, the ESLs must be submitted monthly.

Pensions

The Chancellor announced various further restrictions on higher rate tax relief on pension contributions.  These appear highly complicated and would effects individuals differently.  Please contact us if you would like further information about these restrictions.

 

September 2009

 

National Minimum Wage Increase

From 1 October 2009  the national minimum wage increased again:

Aged 22 and over	£5.80	(£5.73)
Aged 18 to 21	£4.83	(£4.77)
Aged 16 to 17	£3.57	(£3.53)

The government is becoming concerned that large numbers of employers are not paying the relevant NMW.  Our payroll software automatically verifies compliance with NMW rates, so we are in a position to assist you with your payroll and NMW checks.

ISA Limits

From 6 October 2009 those aged 50 or older will be able to increase the level of investments in ISAs to £10,200 from the existing £7,200.  The cash investment levels rises from £3,600 to £5,100.  The increased limit will be available to all from 6 April 2010

 

July 2009

 

Penalties For Late Submission of Self Assessment Tax Returns

Previously it has been possible to avoid the £100 late submission filing penalty if all the tax due by the relevant deadlines has been paid (or a refund was due).

From April 2010, a penalty of £100 will be imposed for late submission regardless of whether or not the tax due has been paid.

In addition, returns that are between 3 and 6 months late will suffer a daily penalty of £10 (to a maximum of £900).  If the return is still outstanding 6 months after the deadline, a further penalty of 5% of the tax due will be imposed.  This happens again if the tax return is 12 months late.  After this a penalty of 70% can be imposed if HMRC believe that information is being withheld preventing them from determining your tax position.  This can rise to 100% if the information is being concealed or withheld deliberately.

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