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Tuesday’s budget focused on reducing debt and, as a result, many changes are about to take place. We have summarised the main points of the budget for you below.

Tax


> From January 4 2011, the main rate of VAT will rise from 17.5% to 20%, although current zero-rated items will remain unchanged.

> Personal income tax allowance is set to increase by £1,000 in April 2011 to £7,475, worth £170 a year to basic rate taxpayers. The higher rate threshold will remain frozen until 2013/2014.

> Capital Gains Tax annual exemption will remain at £10,100, however there will be an increase of higher rate CGT from 18% to 28%, for higher rate taxpayers, with immediate effect.  The ‘entrepreneurs’ relief" rate of 10% on the first £2m of gains will be extended to the first £5m.

Business


> From April 2011, the threshold at which employers begin to pay National Insurance will rise by £21 per week, above indexation.

> The small companies’ tax rate will be cut to 20% with effect from April 2011. In addition, the large company rate of Corporation Tax will be cut next year to 27% and by 1% annually for the next three years, until it reaches 24%.

> The 100% Annual Investment Allowance for plant & machinery will be reduced to £25k per annum from April 2012.

The rates for writing-down allowances for new and unrelieved expenditure on plant and machinery will also be reduced as follows (effective April 2012):

(1) 18% per annum for expenditure in the main rate pool

(2) 8% per annum for expenditure in the special rate pool (long life assets, etc).

> A new £5,000 National Insurance break will be given to new businesses outside London, South East and East areas for the first 10 employees.

Benefits


> Child benefit will freeze for the next three years and tax credits will be reduced for families earning over £40,000 next year. Low income families will receive £150 above inflation in Children’s Tax Credit.

> In order to save £1.8bn a year by the end of Parliament, a new maximum limit of £400 a week will be applied to Housing Benefit.

> From 2011 (except for the state pension and pension credit) benefits, tax credits and public service pensions will rise in line with the Consumer Price Index, rather than the Retail Price Index. This will save over £6 billion a year by the end of the Parliament.

> The welfare shake-up aims to save £11bn by 2014/15.

Cigarettes, alcohol and fuel


> The planned 10% increase on cider has been scrapped. No increases in cigarettes, alcohol and fuel.

 

For further information regarding the budget, please contact Advantage Accounts on 0844 800 6985 or email info@advantageaccounts.com.

Kind regards, Advantage Accounts