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Income Tax A new 45% higher income tax rate is proposed for earnings above £150,000 from April 2011. For people with income above £140,000, your personal allowance is to be withdrawn. What this means to me? If you earn over £150,000 per annum then you will pay an extra 5p per pound in tax. For those earning over £140,000 your personal allowance, currently £6,035 for under 65’s, will be removed effectively increasing your taxable pay by the personal allowance amount. For example, under the currently regime, if you earn £180,000 then you are taxed on £173,965 however under the new regime (from 2011) you will be taxed on the full £180,000. Corporation Tax 1p increase in corporation tax deferred for small businesses Tax repayment scheme for previously profitable businesses will be extended so up to £50,000 of losses can be offset against profits made over last three years What this means to me? The deferral of the increase in corporation tax from 21% to 22% means that your profits will remain to be taxed at 21% If the company makes a loss in its latest trading year, it will have the opportunity to carry back the loss to the previous 3 years instead of only one thereby gaining an advantage for higher tax repayments, rather then carrying forward losses for later relief.
VAT The VAT rate is to be cut from 17.5% to 15% from next Monday 1st December for 13 months. What this means to me? Your taxable sales will need to be adjusted to include 15% VAT instead of 17.5% and you will now reclaim 15% on taxable purchases. Please refer to the enclosed instructions for how to update your computerised accounts software for the changes or give us a call if you are unsure of anything. If you are not VAT registered then you should see a 2.5% reduction in things you purchase, providing your suppliers pass on the VAT reduction. Click here to view our guide on the new 15% VAT National Insurance From April 2011 all rates of National Insurance contributions to be increased by 0.5% for all employees and employers. The lower earnings limit is to be raised to the personal allowance limit of income tax What this means to me? If you are self employed then you currently pay National Insurance at a rate of 8%, this will be increased to 8.5%. If you are employed then you pay National Insurance of 11% and your employer pays contributions of 12.8%. These amounts will increase to 11.5% and 13.3% respectively. Higher rate taxpayers pay an addition 1% National Insurance contribution which remains unchanged.
Tax credit and Allowances The £120 rebate for basic rate taxpayers, introduced in the wake of the 10p tax row, is made permanent and increased to £145 from April
The pension credit will be increased in April from £124 to £130 a week for individuals and from £189 to £198 for couples. State pensions to rise in line with highest rate of inflation - an increase of £4.55 a week for a single person. Pension and child benefit increases will take effect in January, three months early, and every pensioner gets a one-off payment of £60 from January while couples get £120.
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