PERSONAL INCOME TAX

o The personal allowance for those aged under 65 will increase by £1,000 to £7,475 from 6 April 2011.
o The basic rate band will be reduced by approximately £2,500 so that higher rate taxpayers do not benefit from this increase in the personal allowance. The exact figure will be confirmed when the September’s Retail Prices Index is known.


NATIONAL INSURANCE CONTRIBUTIONS

• The planned increases in national insurance will go ahead, so the rate for employees will increase to 12% and the rate for employers will increase to 13.8% from April 2011.
• The national insurance upper earnings limit/profit limit will be reduced to keep it in line with the income tax higher rate threshold.
• The threshold at which employers start to pay Class 1 NIC’s will be increased by an extra £21 per week above indexation.
• New businesses which start up during a three year qualifying period in specific targeted areas (Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the East Midlands, the West Midlands and the South West) will not have to pay the first £5,000 of Class 1 employer’s NIC’s due in the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business. This scheme is intended to start from September 2010 and will benefit any new business set up from 22 June 2010.


CAPITAL GAINS TAX

From 23 June 2010, there will be two main rates of capital gains tax – 18% and 28%. The rate paid will depend on the individual’s total taxable income – the 28% rate will apply where total taxable and gains exceed the basic rate tax band (£37,400 for 2010/11).

Gains qualifying for entrepreneurs relief will continue to be taxed at 10%, and the lifetime limit of gains qualifying for entrepreneurs relief will be raised from £2 million to £5 million.

These new rates will have affect from 23 June 2010. Gains arising in 2010/11, but before 23 June 2010 will continue to be liable to CGT at 18% and will not be taken in to account in determining the rate at which gains of indivuduals arising on or after 23 June 2010 should be charged.

The annual exempt amount will remain at £10,100 for 2010/11.


CORPORATION TAX

• The full rate of corporation tax for Financial Year 2011,commencing 1 April 2011 be cut to 27%. Further cuts are expected for future years as follows – 26% in 2012/13, 25% in 2013/14 and 24% in 2014/15.
• The small company rate for the Financial Year 2011, commencing 1 April 2011 will be reduced to 20%


CAPITAL ALLOWANCES

• The Annual Investment Allowance will be reduced from the current level of £100,000 to £25,000 from April 2012. Capital expenditure above this level will be eligible for capital allowances at the standard writing down allowance.
• Writing down allowances for new and unrelieved expenditure on plant and machinery will be reduced from 20% to 18% for expenditure in the main rate pool and from 10% to 8% for expenditure in the special rate pool. These changes will take effect from 1 April 2012 for corporation tax and 6 April 2012 for income tax.


VAT

• The standard rate of VAT will increase to 20% from 4 January 2011.
• Zero rated supplies and supplies subject to VAT at the 5% reduced rate are not affected by this change.
• There are no changes to the Cash Accounting or Annual Accounting Schemes, but the rates used under the Flat Rate Scheme will also change to reflect this increase, with affect from 4 January 2011.
• Anti-forestalling legislation will be introduced as a result of this measure.


PENSIONS

• There is the possibility that pensions tax relief will be restricted from 6 April 2011. This is in consultation but it has been suggested that the annual allowance may be in the region of £30,000 to £45,000.
• State pension is to be relinked to earnings from April 2011 and basic state pension will increase every year by the highest of earnings, inflation or 2.5%
• The government will accelerate the increase in state pension age to 66


TAX CREDITS AND CHILD BENEFIT

• From April 2011, tax credits for families with income over £40,000 will be reduced. Further changes will be made in 2012-13.
• Child benefits will be frozen for the next 3 years.


CHILD TRUST FUNDS

• The Government announced on 24 May 2010 that it intends to reduce and then stop all contributions to Child Trust Funds. They intend to reduce government contributions at birth and to stop contributions at age 7 from August 2010. They also intend to stop HMRC from issuing Child Trust Fund vouchers from 1 January 2011.

FURNISHED HOLIDAY LET

The furnished holiday lettings rules, which were due to be withdrawn from 6 April 2010, will now not be withdrawn.

The current rules which mean that the current FHL rules are applied to UK taxpayers with qualified holiday lettings situated elsewhere in the EEA will continue to apply for the 2010/11 tax year.

The Government then plans to change the treatment of furnished holiday lettings from April 2011 and will be looking at a proposal that would:
• 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 a commercial holiday letting, and
• Change the way in which FHL loss relief is given


BANKS

• A levy based on the banks’ balance sheet will be introduced from 1 January 2011, to encourage banks to move to less risky funding profiles