HM Revenue & Customs

Income Tax – for 2012/13 the personal allowances increase to £8,105 for those aged under 65, £10,500 for 65-74’s and £10,660 for those 75 and above. The age allowance limit is increased to £25,400, if income exceeds this the allowances are reduced by £1 for every £2 of income over this (but will not reduce further than £8,105). The next £34,370 will be subject to tax of 20%, 40% tax is payable on income between £42,476 and £150,000,  above this the rate remains 50%. The respective rates for dividends are 10%, 32.5% & 42.5%. Where income exceeds £100,000 the personal allowance is reduced by £1 for every £2 of income over £100,000.

National Insurance – for the self-employed class 2’s increase to £2.65 per week, class 4 is due at 9% on profits between £7,605 and £42,475, and 2% above £42,475. For employees, 12% of earnings between £7,605 (£146 per week) and £42,475 (£817 per week), and 2% above £42,475. Employers NI is due at 13.8% where the employee earns above £7,488 (£144 per week).

Corporation Tax – from 1.4.12 the small companies rate remains at 20% (on first £300k of profit). The main rate (profits exceeding £1.5m) was due to drop to 25% but an additional 1% cut means it will be 24% (a marginal rate of tax is payable on profits between £300k & £1.5m).

VAT – from 1.4.12 the registration limit increases to £77,000 (up from £73,000).

Capital Allowances – as previously announced the Annual Investment Allowance reduces from £100,000 to £25,000. Writing Down Allowances reduce from 20% to 18% for the main rate and from 10% to 8% on the lower rate. A 100% first year allowance is still available for certain energy efficient plant & cars.

Capital Gains Tax – the annual allowance for individuals remains at £10,600. The CGT rate remains at 18% (or 28% if you are a higher rate taxpayer). The Entrepreneurs’ Relief rate of 10% still applies to the sale of businesses for the first £10 million of lifetime gains.

Inheritance Tax – the nil rate band of £325,000 (£650,000 for married couples and civil partners) remains the same.

Business Mileage – rates remain the same at 45p per mile for the first 10,000 business miles and 25p per mile in excess of 10,000 business miles.

ISA’s – for 2012/13 the annual limit is increased to £11,280 (cash element £5,640).

Future Proposals – for 2013/14 the personal allowance is set to increase to £9,205, at the same time though the 20% tax band will reduce to £32,245 meaning 40% tax will be due on income above £41,450. The 50% additional tax rate will reduce to 45%. The age related allowances will be removed, for those already receiving them they will remain at 2012/13 levels until such time the main personal allowance exceeds them. Child benefit legislation will introduce a charge on a taxpayer where their income is in excess of £50,000 in a tax year where they or their partner are in receipt of Child Benefit. The charge will apply at a rate of 1% of the Child Benefit award for each £100 of income between £50,000 and £60,000. Those on income above £60,000 will be subject to a charge equal to the amount of Child Benefit paid (claimants can opt not to receive Child Benefit rather than pay the charge). This comes into effect from 7 January 2013.

All of the above is only a summary of key information. Many other areas were also covered in the budget so please don’t hesitate to contact us should you wish to discuss these or any of the above.

All remaining vat registered businesses will have to submit vat returns online and pay electronically from April 2012.

Small business rate relief – the present relief will be extended for a further 6 months from 1st October 2012.

National Loan Guarantee Scheme – over the next 2 years the scheme will lower the cost of bank loans for smaller businesses by up to one percentage point. Firms should apply to their bank in the normal way quoting the above scheme.

Tax allowances 2012/13 – the personal allowance will rise from £7475 to £8105. The higher rate threshold remains at £42475.

New penalties apply to 2010/11 tax returns:

Deadlines are 31st October 2011 for paper returns, and 31st January 2012 for online returns.

Late returns will incur the following penalties:

One day late – penalty of £100 (even if you have no tax to pay).

3 months late – daily penalty of £10, up to a maximum of £900.

6 months late – another £300 or 5% of the tax due if higher.

12 months late – another £300 or 5% of the tax due if higher. Serious cases could face a penalty of 100% of the tax due.

Penalties for paying late:

30 days late – 5% of the tax unpaid.

6 months late – further 5% of the tax unpaid.

12 months late – further 5% of the tax unpaid.

If you haven’t already had your 2010/11 tax return completed, we would urge you to bring your books in as soon as possible.

Income tax – the personal allowance increases to £7475 (£143.75 per week). The next £35000 will be taxed at 20%; then 40% for income between £42475 and £100000. Above £100000, the personal allowance will reduce by £1 for each £2 of income. At £150000, income tax increases to 50%. The personal allowance for 65-74’s increases to £9940, and for age 75 and over it increases to £10090.

Corporation tax – the small companies rate (first £300k of profit) reduces to 20% from 1.4.11. The large companies rate (profits over £300k) reduces from 28% to 26% from 1.4.11.

National Insurance – self-employment – class 2’s increase to £2.50 per week, class 4’s increase to 9% of profits of profits between £7225 and £42475, and 2% above £42475. For employees, 12% of earnings between £7225 (£139 per week) and £42475 (£817 per week), and 2% above £42475. For employers, 13.8% on all earnings above £7075 (£136 per week).

VAT – the registration limit increases from £70000 to £73000 from 1.4.11.

Capital allowances – the Annual Investment Allowance (excludes cars) reduces from £100k to £25k from April 2012. It would therefore be wise to purchase any large items before April 2012. Also at April 2012, writing down allowances reduce from 20% to 18%.

Capital gains tax – the annual allowance for individuals (not companies) increases to £10600. CGT rates are 18% ( or 28% if the gain takes you above the £42475 threshold). The sale of businesses benefit from a lower 10% CGT rate (Entrepreneurs relief) for the first £10 million of lifetime gains.

Inheritance tax – the nil rate band of £325000 (£650000 for married couples and civil partners) is frozen until April 2015.

Small business rate relief – the SBBR will be extended by 1 year from October 2011. There will also be 21 new enterprise zones which will attract 100% discount on rates.

Furnished holiday lettings – from April 2011, losses can only be offset against future profits from the same FHL business.

Directors of owner managed companies – please note that with the increase in personal allowance and the corresponding reduction in the 40% tax threshold to £42475 from April 2011, the amount of dividends available without going into high rate tax is reduced.

Business mileage rates – from 6.4.11 the tax free rates are 45p ( up from 40p) for the first 10000 business miles, and 25p on miles in excess of 10000.

ISAS – for 2011/12, the annual limit is increased to £10680 (cash element £5340).

As always, please contact us if you wish to discuss your personal situation.

Income tax – the personal allowance will rise by £1000 to £7475 on 6.4.11. The basic rate limit will be reduced so that higher rate taxpayers will not benefit.

Corporation tax – the small companies rate (first £300k of profit) will reduce by 1% to 20% on 1.4.11.

VAT – the standard rate rises to 20% on 4.1.11. If you are planning a major purchase and unable to re-claim vat, it would make sense to beat the deadline.

National Insurance  – the main N.I. rates will rise by 1% on 6.4.11 as previously announced.

Capital gains tax – from 23.6.10, the flat rate of 18% stays the same for basic rate taxpayers, but increases to 28% for higher rate taxpayers. The annual exempt amount will remain at £10100. The entrepreneurs limit for lifetime gains (at 10% tax) increases from £2m to £5m from 23.6.10.

Capital allowances – the 100% tax relief in year one will be reduced from £100k to £25k from April 2012 (excludes cars). The normal allowance will be reduced from 20% to 18% at the same time. 

Summary – at April 2011, with corporation tax reducing by 1% and National Insurance increasing by 1%, it becomes more attractive to operate as a Limited Company. Please contact us to discuss further.

In HMRC’s vat notes 1 of 2010, they state that from 1.4.10 they will consider payments by cheque as received on the date the payment reaches HMRC’s bank account. Previously they treated them as received on the date the cheque arrived. Obviously they are pushing businesses to pay electronically.

Income tax – the personal allowance remains at £6475 (£124.52 per week). The next £37400 will be taxed at 20%; then 40% for income between £43875 and £100000. Above £100000, the personal allowance will reduce by £1 for each £2 of income, creating an effective 60% tax rate on earnings between £100000 and £112950. At £150000, income tax increases to 50%. The personal allowance for 65-74’s remains at £9490, and for age 75 and over it remains at £9640.

Corporation tax – the small companies rate (first £300k of profit) remains at 21% for the year commencing 1.4.10.

National Insurance – self employment – class 2’s remain at £2.40 per week, class 4’s are 8% of profits between £5715 and £43875, and 1% above £43875. For employees – 11% of earnings between £110 and £844 per week, and 1% above £844. Employers – 12.8% on all earnings above £110 per week.

VAT – registration limit increases from £68000 to £70000 from 1.4.10.

Capital allowances – the first £100k of capital expenditure excluding cars in 2010/11 will qualify for 100% tax relief in year one. Cars – as last year, allowances depend on their CO2 emissions – 100% if not more than 110g/km, 20% for 110 to 160g/km, 10% if over 160g/km. Vans are 100% providing that the value falls within the annual £100k allowance.

Capital gains tax – the annual allowance for individuals ( not companies) remains at £10100. The 18% flat rate of tax continues into 2010/11. The entrepreneurs limit for lifetime gains (at 10% tax) increases from £1m to £2m.

Inheritance tax – the nil rate band remains at £325000 for 2010/11 (£650000 for married couples and civil partners).

Furnished holiday lettings – the special rules which allowed losses to be offset against other income will be withdrawn from 6.4.10.

Just a quick reminder that the VAT rate will return to 17.5% on 1st January 2010.

If you are unsure how this affects you please contact us or visit the HMRC website (see our links page).