Budget
23 March Budget 2011
Budget 2011
Income tax Bands
| 2011/12 | 2010/11 | |
| 20% on the first: | £0-£35,000 | £0-£37,400 |
| (Band will reduce further to£34,370 for 2012/13) | ||
| 40%on: | £35,001-£150,000 | £37,401-£150,000 |
| 50%over: | £150,000 | £150,000 |
Dividends are taxed at 10%,32.5%or 42.5% as the top slice of total income in both years.
Personal allowances
| 2011/12 | 2010/11 | |
| Personal | £7,475 | £6,475 |
| Incomelimit for personal allowance is £100,000 in both years (*)(**)
(Rate will increase to£8,105 for 2012/13) |
||
| Age allowance (age at end of tax year) (**): | ||
| Personal:age 65-74 | £9,940 | £9,490 |
| Personal:age 75 or over | £10,090 | £9,640 |
| Marriedcouple's (***) | £7,295 | £6,965 |
| Income limit for age allowances | £24,000 |
£22,90 |
| Blindperson's allowance | £1,980 | £1,890 |
(*)The personal allowance is reduced by £1 for each £2 by which income exceeds £100,000, irrespective of age.
(**)Age-related allowances first reduce by £1 for each £2 by which income exceeds the income limit, reducing to a minimum of the personal allowance. Such allowances can be reduced further under (*).
(***)Relief is limited to 10%,and extends to certain civil partnerships. At least one spouse/partner must have been born before 6 April 1935. The allowance is reduced where income exceeds the income limit, subject to an absolute minimum of £2,8002011/12 (£2,670– 2010/11). In certain circumstances couples may determine how the allowance may best be used.
Pensioncontributions
| 2011/12 | 2010/11 | |
| Lifetime allowance (1) | £1,800,000 | £1,800,000 |
| Maximum contribution annual allowance: | £50,000 (2) | £255,000(3) |
Tax on excess Marginal rate (40%)
(1)The lifetime allowance reduces to £1,500,000 on 6 April 2012.Special rules may apply to individuals with larger benefits at 5 April 2006, and for those with benefits over £1,500,000 on 5 April2012. Excess over the lifetime allowance may be subject to a 25%charge plus income tax on balances drawn, or 55% for lump sumbenefits.
(2)Unused allowances from the previous three years (by reference to alimit of £50,000) may be carried forward increasing the current year's allowance in 2011/12 and subsequent tax years.
(3)For 2010/11 anyone with income higher than £130,000 may have had tax relief on pension contributions restricted to the basic rate.
Company cars – annual benefits
The annual benefit is a percentage of list price, with the percentage dependent on the level of CO2 emissions. The minimum benefit is 5%for emissions of75g/km or less. For emissions of over 75 and up to 120g/km, the rate is 10% and for emissions of over120 and up to 125g/km the rate is 15% and increases by 1%for each additional full 5g/km up to a maximum charge of 35% for emissions of 225g/km or more.
There is a diesel supplement of 3%for all bands,subject to a maximum charge of 35%.
Reduced percentages apply for cars running on alternative fuels, e.g. hybrid,LPG.
For vans, the taxable benefit for significant private use is £3,000 in both years.
For five years until 5 April 2015 the benefit charge for electric cars and vans is £NIL.
Fuel: if fuel is provided for private use in a car, the car benefit percentage is applied to £18,800 2011/12 (£18,000– 2010/11).
The benefit for fuel provided for a van with significant private use is £5502011/12(£500 –2010/11).
National insurance contributions (NIC)
Class1 employees (2011/12):
| Weekly earnings | Contracted in | Contracted out |
| Upto £102 | Nil | Nil |
| £102.01-£139 | Nil | Rebate 1.6% |
| £139.01-£770 | n/a | 10.4% * |
| £770.01-£817 | n/a | 12% * |
| £139.01-£817 | 12% | n/a |
| Over £817 | 2%* | 2%* |
(*Representing 1% increases over 2010/11)
National insurance contributions (NIC)
Class1 employers (2011/12):
| Weekly earnings | Contracted in | Contracted out | |
| Salary related | Money purchase | ||
| Upto £102 | Nil | Nil | Nil |
| £102.01-£136 | Nil | Rebate 3.7% | Rebate 1.4% |
| £136.01-£770 | n/a | 10.1% | 12.4% |
| £770.01-£817 | n/a | 13.8% | 13.8% |
| £139.01-£817 | 13.8% | n/a | n/a |
| Over £817 | 13.8% | 13.8% | 13.8% |
Other:
Class1A (employersonly): 13.8%
Class1B (employersonly): 13.8%
Class2 (flat rate forself-employed): £2.50,up from £2.40per week.
Class3 (voluntary):£12.60 perweek.
Class4 (self-employed):9% 2011/11 (8%- 2012/11) of profits between £7,225 2011/12 (£5,715– 2010/11) and £42,475 2011/12 (£43,875– 2010/11) per annum and 2%2011/12 (1% -2010/11) on profits above £42,475 2011/12 (£43,875– 2010/11).
Collection of the Class 2 contributions will be in January and July each year in the future, presumably part of the proposed harmonisation between tax and NIC.
Insurance premium tax
Standard rate (from 4 January 2011) 6%
Higher rate (from 4 January 2011) 20%
Capital gains tax
| 2011/12 | From 6 April 2010 | From 23 June 2010 | |
| For standard rate taxpayers | 18% | 18% | 18% |
| For higher rate taxpayers | 28% | 18% | 18% |
| Annual exempt amount: | |||
| Individuals | £10,600 | £10,100 | £10,100 |
|
Entrepreneurs’ relief lifetime limit: |
£10,000,000 | £2,000,000 | £5,000,000 |
| Entrepreneurs'rate | 10% | 10% | 10% |
Inheritance tax
up to £325,000 0%
over £325,000 40%
Reduced charge on lifetime gifts within seven years of death applies.
(Nochange from last year)
A surviving spouse or civil partner may claim the unused proportion of an earlier deceased spouse's or civil partner's nil rate band upto the current nil rate band.
Tax-efficient investments
| 2011/12 | 2010/11 | |
| ISA investment limits | £10,680 | £10,200 |
| Cash ISA maximum investment | £5,340 | £5,100 |
Venture capital trusts (VCTs):income tax relief at up to 30% on investment upto £200,000.
Enterprise investment scheme (EIS):income tax relief at up to 30% on qualifying share subscription between £500 and £500,000.
Corporation tax
| Financial year | 2011 | 2010 |
| Small profits rate | £0-£300,000 20% | £0-£300,000 21% |
| Marginal rate | £300,001-£1,500,000 27.5% | £300,001-£1,500,000 29.75% |
| Main rate | Over £1,500,000 26% | Over £1,500,000 28% |
The standard rate will further decrease by 1% in each year until 2014/15when the standard rate will be 23%.
Capital allowances
| Expenditure on: | 2011/12 | 2010/11 |
| Plant and machinery: | 20% | 20% |
| (reducing to 18% 2012/13) | ||
| Motorcars on or after April 2009 – CO2 emissions: | ||
| Less than 110g/km | 100% | 100% |
| 110g/km-160g/km | 20% | 20% |
| More than 160g/km | 10% | 10% |
| Motorcars pre April 2009 | 20% | 20% |
| (subject to a maximum of £3000 per vehicle) | ||
| Zero emission goods vehicles | 100% | 100% |
| Industrial/agricultural buildings and works/hotels: | Nil% | 1% |
| Longlife assets/integral features in buildings: | 10% | 10% |
| (reduced to 8% from 2012/13) | ||
| Patent rights and know how | 25% | 25% |
| Mines,oil wells, mineral rights | 25% | 25% |
| Research and development | 100% | 100% |
| Energy-saving and water efficient plant and machinery: | 100% | 100% |
| Renovationof business premises (deprived areas): | 100% | 100% |
There is a 100% annual investment allowance on the first £100,000 per group of companies or related entities, of capital expenditure on plant and machinery including long life assets and integral features, but excluding cars. This allowance will reduce to £25,000 from April 2012.
Stamp duties
| 2011/12 | 2010/11 | |
| Stamp duty land tax on non-residential land and buildings: | ||
| £0-£150,000 | 0% | 0% |
| £150,001-£250,000 | 1% | 1% |
| £250,001-£500,000 | 3% | 3% |
| Over £500,000 | 4% | 4% |
| Stampduty land tax on residential land and buildings: | ||
| £0-£125,000 | 0% | 0% |
| £125,001-£250,000 | 1% | 1% |
| £250,001-£500,000 | 3% | 3% |
| Over £500,001 | 4% | 4% |
| Over £1,000,000 | 5% | n/a |
For new zero carbon homes, including flats, the 0% threshold extends to £500,000 until 30 September 2012; for such properties over £500,000 there is a £15,000 reduction.
For residential property in disadvantaged areas, the 0% threshold extends to £150,000.
The 0% threshold extends to £250,000 for first time buyers only for purchases where the date of completion is between 25 March 2010 and 24 March 2012.
Shares and securities 0.5% unchanged from previous year
Stamp duty reserve tax 0.5%/1.5% unchanged from previous year
Value added tax
| From | 4 January 2011 | To 3 January 2011 |
| Standard rate | 20% | 17.5% |
| Lower rate | 5% | 5% |
| Zero rate | 0% | 0% |
Registration threshold (changes from 1 April 2011): £73,000 (previously £70,000)
Approved MileageAllowance Payments rates from 2011-12
Where employees use their own cars for business mileage they can claim reimbursement through the approved mileage allowance payments rates which is not regarded as a taxable benefit. There is currently a higher rate of 40p per mile for the first 10,000 miles of business use and 25p per mile thereafter.
The higher rate will be increased to 45p per mile with effect from 6 April 2011.
IR35
The Government hasconsidered the three options on IR35 set out in the Office of TaxSimplification's report on its review of small business and decidedto retain IR35 and to achieve simplification by making improvementsto the way in which it is administered. Details to be announced. The proposed merger of Tax and National Insurance, still under discussion, could in any case make IR35 obsolete.
Residency
It is proposed that a clearer test of residency will be announced following the fiasco of the Gaines Cooper case.