Budget 2011 - At a Glance

The Budget was announced at 12.30pm today. For your ease, we have set out below a summary of the decisions announced.   

Capital allowances

• Small & medium companies' research and development tax credit to rise, giving a total deduction of 200% with effect from 1^st April 2011, and 225% from 1^st April 2012.
  
  
• However, as announced last June, annual investment allowance ("AIA"), which allows most businesses, regardless of size, to reduce their taxable profits by the full amount of their annual capital expenditure on most plant or machinery (but not including cars) up to a maximum amount currently of £100,000 a year, is to  be reduced to £25,000 from April 2012.

• With effect from 1^st April 2012 (corporation tax payers) and 6^th April 2012 (for income tax payers):

o         20% per annum writing down allowance for main pool plant and machinery is to be reduced to 18%; and

o         10% per annum writing down allowance for plant and machinery in the special rate pool is to be reduced to 8%.

• Capital allowances short life asset regime for plant and machinery is to be extended from 4 to 8 years from April 2011 to bring forward investment in new equipment.

Capital gains tax

• Annual exempt amount for capital gains will increase from £10,100 to £10,600 from 6^th April 2011.  Future increases will be governed by  rises in the CPI.

• The lifetime limit on gains qualifying for entrepreneurs' relief will be increased to £10 million (from £5 million) with effect from 6^th April 2011. Certain capital gains up to the lifetime limit are taxable at 10%.

• Flat rate of capital gains tax remain unchanged at  18% and 28% for higher rate tax payers.

Corporation tax

• Main rate of corporation tax for companies with profits over £1,500,000 to be reduced to 26% from 1^st April 2011 with further reductions to:

o         25% in 2012-13;

o         24% in 2013-14; and

o         23% in 2014-15.

• As announced last June, small company's corporation tax with profits of £300,000 or less to be reduced to 20% from 2011/12.

• Changes to the Controlled Foreign Company rules in 2012 to improve the competitiveness of the UK, including an effective UK tax rate on overseas financing income of 5.75 per cent.

• Anti avoidance measures are to be introduced to counter complex arrangements that seek to exploit certain exceptions to the degrouping charge when a company leaves a group.

Enterprise Investment Scheme ("EIS")

• The rate of income tax relief given under EIS is to increase from 20% to 30% from 6^th April 2011.

• From 6^th April 2012:

o         Increase in thresholds for the size of qualifying companies to increase to no fewer than 250 employees and to the company's gross assets not exceeding £15 million;

o         Annual amount that may be invested in a qualifying company to increase to £10 million; and

o         An increase in the amount any one individual can invest under EIS to be increased to £1 million.

Enterprise Zones

• 21 New Enterprise Zones to be created, including new Zone in Bristol.  Further details to be revealed tomorrow.

Fuel duty

• Fuel duty is to be cut by 1% from 24^th March 2011.

• Planned increases in fuel duty to be scrapped and replaced with a fair fuel stabliser mechanism, to operate in conjunction with a rise in the rate of the supplementary charge levied on profits from UK oil & gas production, which will increase from 20% to 32% from 24^th March 2011.

Income tax personal allowances

• With effect from 6^th April 2012 under 65s personal allowances will be increased from the current allowance of £7,475 to £8,105.  Tax payers paying income tax at the highest rate of 50% will be unaffected by this increase.  The Chancellor restated the Government's intention to increase personal allowances to £10,000 by the end of the Parliament, but to keep the 50% rate under review.

• As announced last June, the basic rate limit will fall from £37,400 to £35,000 for 2011/12, and further fall to £34,370 for 2012/13.

Inheritance tax threshold

• One tenth reduction in the inheritance tax rate when at least one tenth of a person's net estate is donated to charity.

National Insurance contributions

• As announced last June, the 1% rises in employer and employee NICs are to go ahead from 6^th April 2011.  Employer NIC threshold to increase by £21 per week (above consumer prices index) from 6^th April 2011.

• The Government is to enter into consultation to combine and simplify the income tax and NIC systems.

Non domiciles

• The Government is proposing to remove the tax charge when non-domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses.

• The Government is also proposing to increase the current annual charge from £30,000 to £50,000 for non-domicilies who have been UK resident for 12 or more years.  The £30,000 charge will remain for those who have been resident for at least 7 out of the past 9 years.

Pension contributions

• As announced on 14^th October 2010 pension contributions that qualify for tax relief will be reduced to an annual allowance of £50,000 from the previous limit of £255,000 from 2011/12, and the lifetime allowance will be reduced from £1.8 million to £1.5 million from 2012/13.

Stamp duty land tax

• As announced last March, a new rate of 5% will be applied to the purchase of residential property for more than £1 million.

• The Government is to provide relief for multiple purchases of residential property, though it is to further crack down on anti avoidance schemes, particularly targeting sub-sale and alternative finance schemes.

VAT

• Registration threshold will be increased from £70,000 to £73,000 with effect from 1^st April 2011.

• Deregistration threshold will be increased from £68,000 to £71,000 with effect from 1^st April 2011.

• Registration and deregistration threshold for relevant acquisitions from other EU Member States will be  increased from £70,000 to £73,000 with effect from 1^st April 2011.