On 22nd June 2010 the Chancellor of the Exchequer George Osborne set out his Budget with a comprehensive five-year plan to rebuild the British economy. The plan was announced as setting out tough but fair action to tackle the unprecedented budget deficit, introduce a fairer tax system, encourage enterprise and support long-term growth across the economy.
We have summarised the main points below which we think may be of interest to our clients.
Capital Gains Tax (CGT)
- CGT will remain at 18% for basic rate taxpayers, but will rise to 28% for higher rate tax payers from midnight on 22nd June 2010.
- The annual CGT allowance of £10,100 stays the same for the 2010/2011 tax year but will increase in line with inflation year on year.
Pension Taxation
- The Government announced it is considering restricting pensions tax relief from 6 April 2011, by reforming the existing pension savings allowances, principally by significantly reducing the annual allowance. The Government will discuss the changes with interested parties but provisional analysis has suggested that the level of a reformed annual allowance may be in the region of £30,000 to £45,000.
The reformed allowances would replace the high income excess relief charge, which currently is due to come into force on 6 April 2011.
The Government has issued the following statement:
http://www.hm-treasury.gov.uk/d/junebudget_restricting_pension.pdf
- The perceived 'compulsory annuitisation' by age 75 will be extended to age 77, while the Government consults on a permanent change to these rules. It will still not be possible to contribute to a pension after age 75.
Indexing ISA Limits from 2011
From 6 April 2011 the Individual Savings Allowance (ISA) limits will be increased in line with the Retail Prices Index (RPI) on an annual basis.
Indexation of the ISA limits for the tax year 2011-12 will come into effect on and after 6 April 2011. Indexation of the ISA limits for subsequent tax years will have effect on and after 6 April of each year.
From 6 April 2011 the annual ISA subscription limits will be linked to the Retail Prices Index (RPI). They will be rounded to a convenient multiple of 120 so that individuals who save monthly will be able to calculate their monthly savings more easily.
The new limits will be calculated by reference to the RPI for the September before the start of the following tax year, and HM Revenue & Customs will announce the new limits each year in advance of the start of the new tax year in which they will apply.
Full details can be found at: http://www.hmrc.gov.uk/budget2010/bn21.pdf
Increase in VAT
Legislation will be introduced in the Finance Bill 2010 to increase the standard rate of VAT from 17.5 per cent to 20 per cent. The 20 per cent rate will have effect for any supply made on or after 4 January 2011 and any acquisition or importation taking place on or after that date.
Full details are available at: http://www.hmrc.gov.uk/budget2010/bn43.pdf
The Personal Allowance, Basic Rate Limit and National Insurance Thresholds for 2011-2012
Legislation will be introduced to provide for the following Income Tax and National Insurance Contributions (NICs) changes for 2011-12:
- the personal allowance for those aged under 65 will be increased by £1,000 to £7,475;
- the basic rate limit will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance. The exact figure will be confirmed when September’s Retail Prices Index (RPI) is known;
- the alignment of the Upper Earnings/Upper Profits Limit (UEL/UPL) with the higher rate threshold (the total of the personal allowance for those aged under 65 and the basic rate limit) will be maintained by reducing the UEL/UPL; and
- the secondary threshold, which is the point at which employers start to pay Class 1 NICs, is to be increased by an extra £21 per week above indexation.
Full details are available at: http://www.hmrc.gov.uk/budget2010/bn01.pdf
In addition the main changes to rates and allowances in tax year 2010-2011 and tax year 2011-2012 are available at: http://www.hm-treasury.gov.uk/d/junebudget_press_notice2.pdf
