Increase in Personal Allowance
From 6 April 2011 basic individual personal tax allowances will rise from £6,475 to £7,475 which means that individuals will be able to earn up to this level without paying any income tax. There will be a further rise in the personal allowance to £8,105 in the future.

 

Reduction in Higher Rate Tax Threshold
The level of income at which individuals will pay higher rate tax of 40% will be reduced from 6 April 2011 from £37,401 to £35,001 plus the personal allowance. So for the next tax year taxable income of over £42,476 will be taxed at 40%. Over £100,000 and the personal allowance starts to disappear, and over £150,000 the tax rate rises to 50%.

 

National Insurance Rise
From 6 April 2011 there will be a rise in rates of National Insurance. For employees the rate of Class 1 will increase from 11% to 12% and from 1% to 2% on all earnings above the upper earnings rate of £817 per week. Employers Class 1 National Insurance will also rise from 12.8% to 13.8%.

 

For the self employed Class 2 contributions will increase from £2.40 per week to £2.50 per week and Class 4 Contributions on profits between £7,225 and £42,475 will increase from 8% to 9%. A further charge of 2% will apply to all earnings over £42,475.

Approved Mileage Rate Payments for Employees
Employees who use their own cars for work can claim the approved mileage allowance from their employers without incurring any taxable benefit. The approved rate for the first 10,000 miles in any tax year of business travel is being increased from 40p to 45p per mile. The 25p per mile which applies to additional miles remains unchanged.

 

Capital Allowances for Businesses
The annual investment allowance will remain unchanged for the coming new tax year. Companies, self employed individuals and partnerships will be able to claim a full tax deduction for up to £100,000 worth of capital expenditure. The allowance drops to £25,000 per annum from 6 April 2012 and so anyone thinking of investing in new capital items in excess of £25,000 for their business should take action before the change occurs to ensure they get maximum tax relief.

 

Losses from Furnished Holiday Lettings
The majority of changes to the way in which Furnished Holiday Lettings will be taxed have been deferred to April 2012.
However, from 6 April 2011 it will no longer be possible to offset losses made on a UK or EU Furnished Holiday Let. Loss relief will now be restricted so that losses can only be offset against profits from the same Furnished Holiday Let business. Unused losses will be carried forward to be offset against the first available profits.

 

Pensions Reform
From the start of the new tax year contributions of up to £50,000 per annum will attract full tax relief. There will also be special carry forward provisions for people who are already signed up to a pension scheme but who may not have used all their allowances in the past three years.

 

The total lifetime allowance for the size of an individual’s pension pot will reduce to £1.5m from April 2011.

 

EIS relief
Tax relief for investments qualifying under the Enterprise Investment Scheme will increase from 6 April 2011 from 20% to 30%. The amount that can be invested in such schemes will increase from 6 April 2012 to £1m (currently £500,000).

 

Capital Gains Tax
The rates at which individuals pay Capital Gains Tax are unchanged but the annual exempt amount for individuals and personal representatives will increase in the new tax year to £10,600.

 

Entrepreneurs’ relief will continue to allow gains on specific business assets to be charged at 10%.The lifetime allowance for Entrepreneurs Relief will double to £10m from 6 April 2011.

 

Clamp Down on Failure to Keep Proper records.
HM Revenue & Customs are keen to enforce the requirements for all taxpayers to keep proper records. They have begun a consultation plan to investigate 50,000 people who have failed to keep proper records and/or underpaid tax.

 

Corporation tax Rates
The small companies’ tax rate will be reduced from 1 April 2011 to 20%. This rate applies to all companies with profits below £300,000.

 

The main rate of corporation tax for larger companies will also be reduced to 26% and 1% thereafter to 23%.

 

Mandatory Online Filing for Company Returns
From 1 April 2011 all Company Tax Returns must be filed online.

 

VAT
The VAT registration threshold from April 2011 will be turnover within 12 months of £73,000 with a similar rise in the deregistration threshold to an annual turnover of below £71,000.

 

New Late Filing Penalties
From April 2011 there are new late filing penalties if you don't file your self assessment Tax Return or pay your tax on time.

Penalties for Late Filing
One Day Late - £100 initial penalty (even if you have no tax to pay or have already paid all the tax you owe).
Three Months Late - automatic daily penalty of £10 per day, up to a maximum of £900.
Six Months Late - further penalties, which are the greater of 5% of tax due or £300.
Twelve Months Late - yet more penalties, which are the greater of 5% of tax due or £300. In some serious cases a higher penalty of up to 100% of the tax due.

Penalties for Paying Late
Thirty Days Late - initial penalty of 5% of tax unpaid at that date.
Six Months Late - further penalty of 5% of the tax that is still unpaid.
Twelve Months Late - further panalty of 5% of the tax that is still unpaid.

These penalties are in addition to the interest you will be charged on all outstanding amounts, including unpaid panalties, until payment is received.

Please do contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it or any other member of the Kimball Smith team if you would value a discussion about any of the above and the way in which these changes may affect you or your business.