Personal Taxes

• The main headline in the Budget is the consultation about the proposed merger of National Insurance Contributions and Income Tax.  This would be a radical change and it will take some time to formulate.
• Class 2 NIC will be collected on 31 July and 31 January in the future. Although these are the same dates for payments under self-assessment they will be collected separately. This also appears to be the start of the merger.
• There is a £1,000 increase in the basic personal allowance for income tax for those aged under 65 from £6,475 in 2010/11 to £7,475 in 2011/12 – this is the amount of income most people can have before they start to pay tax.
• The income tax personal allowance is to rise by a further £630 next year, as part of the Coalition's commitment to lift more low earners out of the income tax regime, taking it to £8,105 in 2012/13. 
• National Insurance rates have increased by 1%. This means that employees now pay a primary rate of class 1 NIC of 12% (up from 11%) and the self-employed pay class 4 NIC of 9% (up from 8%). But this increase is offset for those on lower incomes by increases in the lower limits you can earn before starting to pay them - £139 a week for employees and annual profits of £7,225 for the self-employed.
• The approved mileage allowance payment rate will increase by 5p per mile from April. That means that the first 10,000 miles claim is at 45p with 25p thereafter.  This transforms into £500 of tax free mileage for high mileage drivers. 
• The income tax relief available for investments into EIS will increase to 30% from April and the thresholds for EIS and VCT investments will increase in April 2012 subject to State Aid approval from the EU.
• It has been confirmed that the annual allowance for tax relief on pension contributions is reduced from £255,000 to £50,000 from April 2011.
• The ceiling for entrepreneur’s relief is increased to £10 million.
• Although the IR35 regime is to remain, the Government has pledged to improve the way it is administered.

Business Taxes

• Corporation Tax - from April 2011 the main rate of tax will reduce to 26% and with further annual reductions the rate will be 23% from 2014. The small companies’ rate will reduce to 20% from 1 April 2011.
• Capital Allowances – as previously announced Writing Down Allowances rates will reduce from 20% to 18% on the main pool and 10% to 8% on the special rate pools from 2012. The length of a short life asset pool is to be increased to 8 years from the current 4.
• It has been confirmed that the Annual Investment Allowance relief will be reduced in April 2012 from £100,000 to £25,000.
• 21 new Enterprise Zones are to be introduced. There will be a focus in giving enhanced capital allowances for high value manufacturing in these areas.
• VAT filing is set to become compulsory for every registered business.  As from 1 August 2012, online registration for and deregistration from VAT will be compulsory for all.  VAT registered businesses with a VAT exclusive turnover under £100,000 per annum will be required to file returns online as from 1 April 2012 (previously this rule has only applied to those businesses with an annual, VAT exclusive turnover exceeding £100,000 and newly registered businesses).

Charitable Giving, Savings and IHT

• To encourage charitable giving and to support the voluntary sector, the rate of inheritance tax for those who give 10 per cent of their estates to charity is to fall from 40 per cent to 36 per cent from April 2012.
• The Gift Aid benefit limit climbs from £500 to £2,500 from April 2011.  From April 2013 charities and CASC’s will be able to claim gift aid on small gifts (£10 or less) without gift aid declarations, subject to a £5,000 donation limit. HMRC will also be moving the claims to an online form from 2012/13.
• The ability to donate tax refunds through the self-assessment return will stop.
• ISA’s for under 18’s are to be introduced from autumn 2011. It is not clear if there will be a restriction on these as to the source of the funds, in terms of parental gifts, as there are with the usual investments for minor children. We await the detail.