Capital Gains Tax
There was a collective sigh of relief when the rate of capital gains tax on non business assets was (only!) increased to 28 per cent, well below income tax rates. However it was surprising that the Chancellor chose to change the rate part way through a tax year adding a further level of complication to the tax system. Taxpayers will be able to set any unused basic rate band against their gains so that some of the gain will be taxed at 18 per cent and also losses may be utilised in the most tax efficient manner as these are set against non business gains.
The increase in gains that qualify for entrepreneurs' relief to £5 million is welcome, giving a tax rate of 10 per cent on business gains although careful planning is required to ensure that the strict conditions are satisfied.
National Insurance Contributions
It was inevitable that there would not be sufficient money in the coffers to enable the increases in national insurance next year to be reversed, so employers' national insurance will increase to 13.8 per cent next year. However the threshold at which employers will pay national insurance will be raised by £21 per week above inflation to soften the blow.
A new scheme has been proposed for certain regions to grant new businesses a national insurance holiday and more information will be available shortly.
Personal allowance
The Lib Dems made an election pledge to increase personal allowances to £10,000 to help lift low earners out of income tax altogether. The first stage is an increase in the personal allowance next year to £7,495 although the £1,000 increase will be restricted to basic rate taxpayers only.
For taxpayers caught by this clawback it may be worth paying additional pension contributions to bring them back into the basic rate band thus reinstating their entitlement to the full personal allowance. The small print in the legislation will need to be studied first to ensure that this planning measure will be effective and once the Finance Act has been passed this is something that we shall look at in detail for clients.
Corporation Tax
The small companies' rate of corporation tax will be reduced next year to 20 per cent and the main rate will be reduced by 1 per cent each year over the next four years starting in 2011/12 to take it from 28 per cent this year to 24 per cent in 2014/15. The thresholds for the small companies' rate remain unchanged at £300,000 and £1.5m.
Capital Allowances
The 100 per cent annual investment allowance which was only just increased this year to £100,000 will be reduced in 2012/13 to the first £25,000 of qualifying expenditure. There will also be reductions to writing down allowances starting in 2012/13.
Please click on the link below to view our complete budget report. |
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