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BUDGET REPORT MARCH 2011


National Insurance & Income Tax may Merge

The Chancellor wants a complete overhaul of the system, allegedly to simplify it – he is considering merging the NIC and income tax systems, although the NIC element would not affect pensioners. A review and consultation will be undertaken over the next few years.

Inheritance Tax

Good news if you were thinking of leaving some of your estate to charity: - from April 2012 if more than10% of your net estate is left to charity then the rate of IHT will be reduced by 4%, from 40% to 36%. The measure will be designed to benefit gifts to charities rather than legacies to other beneficiaries.

Tax Credits

The basic element of Working Tax Credit and Child Tax credit stays unchanged at £1,920 and £545 per annum respectively. A lowering of the income thresholds and withdrawal rates will mean you may be entitled to less in 2011/12 than you received in the previous year.

Pension Contributions

The Lifetime Allowance of £1.8m is to be reduced to £1.5m from April 2012. The annual allowance for pension savings is to be reduced from 6th April 2011 to £50,000 per annum, but the good news is that there is to be a carry forward allowance of unused relief from the previous 3 years. Relief for pension contributions will be given at your marginal rate of tax.

No Changes

There are to be no changes in 2011/12 to the current rates of stamp duty land tax, insurance premium tax or passenger duty.

ISAs

From 6th April 2011 the annual Individual Savings Account (ISA) limit for every adult is increased to £10,680 of which up to 50% can be saved in cash. Don’t forget that to get the best return on your previous ISA investments you can move an existing ISA fund at any time to another ISA provider (but be sure to check first the date any bonus element is payable on the existing ISA, so you don’t miss out). Leaving previous year ISAs with their existing providers, after the “extra bonus date” has expired often means you are losing out on much better rates of non-taxable interest, which are available on cash ISAs.

Capital Gains Tax

The first £10,600 of gains per annum from 6th April 2011 will be exempt from CGT. Above this CGT will be payable at 18%, up to the basic rate threshold and any excess will be at 28%.
Further good news for business owners; the lifetime limit for Entrepreneurs’ Relief increases to £10m of qualifying gains, to be taxed at an effective rate of 10% from 6th April 2011.

Allowances 2011/12
Personal Allowance	£7,475 *
Personal Allowance (65-74)*	£9,940 ***
Personal Allowance (75 & over)*	£10,090 ***
Blind Person’s Allowance	£1,980
Married Couples Age
Allowance (up to 74)	£N/A
Allowance (75 & over) *    Born after 6/4/1935	£7,295 ****
Income limited for age allowances	£24,000

Tax Rates 2011/12
Taxable Income		General	Interest	Dividends
Starting Rate	£0 to £ 2,560	N/A	10%**	10%**
Basic Rate	Up to £35,000	20%	20%	10%
Higher Rate	Over £35,000	40%	40%	32.5%
Additional Rate	Over £150,000	50%	50%	42.5%

* The personal allowance will be subject to an income limit of £100,000 for all individuals (regardless of age). Personal allowance will be reduced by £1 for every £2 of income above the income limit.
** Starting rate band not available if general income exceeds the band amount.

*** Age allowances are reduced £1 for every £2 by which income exceeds the income limit, until it reaches the normal allowance.
**** Restricted to 10%.

This budget summary is for general information purposes only. You should seek further specific professional advice before taking any action on the basis of the contents of this newsletter.