Marshall Smalley 2011 Budget Overview

The Budget delivered on 23 March 2011 announced tax breaks for business with the aim of raising the level of growth in our economy. For example, tax rates for companies of all sizes are reduced, Enterprise Zones are being reintroduced and Enterprise Investment Scheme and Entrepreneurs reliefs were enhanced. Meanwhile, with higher personal taxes from 6 April 2011 and families tightening their belts as far as possible the fuel duty reduction is a token help with prices rising generally. We hope this is a useful summary of some of the main changes BUSINESS TAXES Corporation Tax: from 1 April 2011, the main rate of corporation tax will be reduced to 26% and then to 25% from 1 April 2012, 24% from 1 April 2013 and 23% from 1 April 2014. Small companies’ rate: as previously announced, this will be reduced to 20% from 1 April 2011. The effective rate of tax for profits between £300,000 and £1,500,000 is 27.5%. Capital allowances: as previously announced, writing-down allowances will be reduced to 18% from April 2012 and the Annual Investment Allowance (AIA) reduced to £25,000. Mileage allowance payments: from 6 April 2011, 45p per mile (up from 40p) can be claimed for the first 10,000 miles per year travelled by an employee on business. Research and development (R&D): from 1 April 2011, the rate of the additional deduction available for undertaking R&D will increase from 75% to 100% of qualifying expenditure. From 1 April 2012, the deduction will increase to125%. Online filing for corporation tax returns: from 1 April 2011 corporation tax returns must be made electronically. This includes the submission of statutory accounts in an electronic format know as iXBRL. PERSONAL TAXES Income tax: as previously announced in Budget 2010, the personal allowance will increase to £7,475 from 6 April 2011 and the basic rate will be reduced to £35,000. Budget 2011 has announced that, from 2012/13, the personal allowance will be increased to £8,105 and the basic rate limit reduced to £34,370. National insurance: as previously announced, from 6 April 2011 employee’s national insurance rates will increase from 11% to 12% below the upper earnings limit and from 1% to 2% above that, with employer’s national insurance contributions rising from 12.8% to 13.8%. Enterprise Investment Scheme (EIS): the rate of income tax relief given under the EIS scheme will be increased from 20% to 30% from 6 April 2011. The maximum amount an individual can invest annually will rise from £500,000 to £1m from 6 April 2012. Inheritance tax: as previously announced, the £325,000 threshold for the nil-rate band is frozen. In addition, where 10% or more of a deceased’s net estate is left to charity the rate of IHT will be reduced to 36% from 6 April 2012. Capital Gains Tax: the annual exemption for 2011/12 will rise to £10,600. Entrepreneurs Relief (ER): from 6 April 2011, the lifetime limit of gains which can benefit from ER will rise to £10m. Individual Savings Accounts: the annual limit is to be increased to £10,680 for 2011/12, up to half of which can be saved in cash deposits. PROPERTY Stamp Duty Land Tax (SDLT): as previously announced, a new increased 5% rate for purchases of residential property will apply to some houses from 6 April 2011. SDLT: bulk residential purchases – a relief will be introduced for purchasers who acquire more than one residential property. The rate of SDLT will be determined by the average consideration subject to a minimum rate of 1%. Enterprise Zones: the Government intends to create 21 new enterprise zones. A business in an enterprise zone will enjoy several advantages: • 100% discount on rates • enhanced capital allowances • relaxed planning obligations Furnished holiday lettings: as previously announced, from 2011/12 losses from furnished holiday lettings can only be set against furnished holiday lettings income rather than against total income. In 2012/13 further rules will restrict the properties that qualify. VAT Registration and de-registration thresholds: the registration threshold will increase to £73,000 and the de-registration threshold to £71,000. Both changes apply from 1 April 2011. Low value consignment relief (LVCR): the threshold at which LVCR operates is being reduced from £18 to £15 from 1 November 2011.