On 23 March, Chancellor George Osborne presented the 2011 Budget, building on the announcements made in the Spending Review 2010 and the June 2010 Emergency Budget 2010.
Below we summarise the key announcements that are likely to affect you personally or professionally.Tax
Inheritance Tax (IHT)
- The personal allowance increases by £1,000 to £7,475 from 6 April 2011.
- The higher rate tax threshold reduces to £35,000 to offset the increase in the personal allowance.
- Personal allowances will increase to £9,940 for individuals aged between 64 and 74, and £10,090 for individuals over 75.
- The Chancellor made clear his view that the 50% ‘Additional Rate’ of tax is a temporary measure but that now was not the right time to remove it.
- The personal allowance will rise by a further £630 to £8,105 from 6 April 2012 for those under 65. There will be a corresponding £630 decrease in the higher
rate tax threshold taking it to £34,370.
- The previously announced 1% increase in National Insurance will go ahead from 6 April 2011.
- The Government is considering merging income tax and national insurance.
- From April 2012 the Government intends to reform the taxation of non-domiciled individuals, increasing the £30,000 remittance basis charge to £50,000 for
those who have been UK resident for 12 or more years and who wish to retain access to the remittance basis regime. The charge will not apply on income remitted for commercial investment in UK businesses.
Capital Gains Tax (CGT)
- The IHT nil rate band is frozen at £325,000 until April 2015, after which point CPI will be used as the default indexation assumption for increases to the band.
- IHT will be reduced by 10% for those leaving 10% of their estate to charity from 6 April 2012.
Savings & InvestmentsISAs
- The CGT annual exempt amount will increase to £10,600 with effect from 6 April 2011.
- From 6 April 2012 the CGT annual exempt amount will be increased annually in line with CPI.
- The Entrepreneurs’ Relief limit on lifetime gains will be doubled to £10 million with effect from 6 April 2011.
Enterprise Investment Schemes (EIS)
- The annual ISA subscription limit will increase to £10,680 from 6 April 2011 (of which up to £5,340 can be invested in cash).
- From 6 April 2012 the annual ISA limit will increase annually in line with the Consumer Price Index (CPI). If this is negative, the limit will remain unchanged.
A new Junior ISA product will be available for UK resident children who do not have a Child Trust Fund account. This is likely to be available from autumn 2011.
- With effect from 6 April 2011, the rate of income tax relief available on Enterprise Investment Schemes will increase from 20% to 30%.
- Further changes are planned for 2012 including doubling the maximum EIS investment to £1million.
- Lord Hutton’s review of public sector pensions has been acknowledged by the Government. Further proposals will be made in the autumn.
- Discount rate on unfunded Public Sector pensions to be reduced to 3% above CPI, meaning that the extra costs are likely to fall on public sector employers as
the Government announced that it will not allow contributions for members to rise more than has already been announced i.e. an average of 3% or pensionable earnings.
- There is a long term aim for £140 a week flat-rate state pension. This will not apply to current pensioners.
- It is intended that State pension age will be linked to longevity. It is already due to rise from 65 to 66 in 2020 but future increases will be more ‘automated’.
- Council Tax: This has been frozen for every council in England from April 2011-2012.
- Inflation: Is forecast to remain between 4%- 5% during 2011 and will fall to 2.5% in 2012.
- Fuel prices: From 6pm on Wednesday 23 March 2011, motorists will benefit from a 1p reduction in fuel prices.
- Air passenger charges: Holiday makers will benefit from a freeze on the planned increase in air passenger duty.
- For motorists who are required to use their own vehicle for work, the AMAPs rate will rise to 45 pence (from 40 pence) per mile for the first 10,000 miles and remain at 25 pence per mile thereafter.
PropertyStamp duty land tax
- Corporation Tax to be reduced by 2% in April 2011, and will continue to fall by 1% for the next three years to a final level of 23% by 2014.
- The small profits rate of Corporation Tax will reduce by 1% to 20% for the financial year starting April 2011.
- In autumn the Government will announce the outcome of its review of stamp duty for first time buyers.
- A new shared equity scheme will be available to first-time buyers with a 5%deposit. The Government and the housebuilder will add 10% of the property value to the deposit, in the form of a loan to the buyer at low rates of interest.