Chancellor, George Osborne’s budget speech yesterday was centred on his four economic visions or ambitions that Britain:
1. should have the most competitive tax system in the G20,
2. should be the best place to start a business,
3. should have a more balanced economy
4. and should have a more educated and flexible workforce.
Below is our summary of his speech and the key points that we feel are most pertinent to our clients and their businesses:
- Personal Allowance for income tax (PAYE) rises by £1,000 per annum as expected and this will be raised by a further £630 in 2012 for under 65’s.
- Employer’s National Insurance Contributions are being raised by 1% to 13.8% and employees NIC raised to 12%. However, the thresholds at which NI becomes payable has also been raised significantly
- Corporation Tax rates for small businesses lowered from 21% to 20% as expected but for larger companies it has been reduced by 2%, from 28% to 26%, as opposed to the 1% planned. Corporation Tax rates will continue to fall for the next 3 years
- The annual exempt amount for capital gains tax will increase from £10,100 to £10,600
- Mileage Allowance will be raised from 40p per mile to 45p per mile for the first 10,000 miles from 6 April
- Enterprise Investment Scheme: From April this year, income tax relief will increase from 20% to 30% and next year the amount an individual can invest through an EIS will double. In addition the government will increase the size of a company that can qualify for this investment and raise the amount that can be invested by 400%
- From 6th April this year Entrepreneurs Relief will double to £10 million.
- In February 2011 the five largest banks operating in the UK agreed to make a total of £76 billion available to SMEs, £10 billion more than the banks lent to SMEs in 2010
- In recognition of high current oil prices fuel duty will be cut by 1p per litre from 6pm today and the planned April 2011 inflation only increase has been delayed until January 2012
Other interesting facts and figures from the budget:
- Forecasted economic growth in the UK has been downgraded from 2.1% to 1.7% for 2011
- Inflation will remain between 4% and 5% this year and fall to 2% by 2013
- As a result of the findings by the Office for Tax Simplification (OTS) the government will begin consulting on proposals to integrate PAYE (income tax) and NI to form one new tax. In addition they plan to reform and simplify the pension system for future pensioners.
- The government is also looking to reform the taxation of Non Domiciles. This includes raising the charge for Non Doms wishing to us the remittance basis of taxation from £30k to £50k per annum for those who have been in the UK more than 12 years. Mr Osborne also stated however ‘To end the speculation and uncertainty, and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament.’
- For now the 50 pence tax rate on earnings over £150k remains however Mr Osborne confirmed that this would not be permanent to we can expect this tax rate to fall away in the coming years
- And finally - alcohol duty rates will increase by 2 per cent above the RPI on 28 March 2011. This will add 4 pence to the price of a pint of beer, 15 pence to the price of a bottle of wine, and 54 pence to the price of a bottle of spirits.
Overall the budget contained few surprises other than the welcome decision to not increase fuel duty! We will continue to monitor the implications of any changes that have been made and update our clients as and when necessary.