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Income
Tax |
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The tax thresholds and personal allowances for 2010/11 are
as follows |
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Income Tax
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2009/10 |
2010/11 |
Basic rate band |
£37,400* |
£37,400* |
Tax rate
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20% |
20% |
Basic rate for dividend income
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10% |
10% |
Higher rate – income over
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£37,400 |
£37,400 |
Higher rate
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40% |
40% |
Dividend upper rate
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32.5% |
32.5% |
| Additional rate – income over |
n/a |
£150,000 |
Additional rate
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n/a |
50% |
Dividend additional rate
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n/a |
42.5% |
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* There is a 10% starting rate for savings income up to the
starting rate limit within the basic rate band. Where taxable
non-savings income does not fully occupy the starting rate band
the remainder of the starting rate band is available for savings
income. |
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Personal allowances |
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| (age at the end of the tax year) |
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| Under 65 |
£6,475 |
£6,475 |
| 65 – 74 |
£9,490 |
£9,490 |
| 75 and over |
£9,640 |
£9,640 |
| Higher allowances scaled back if income exceeds |
£22,900 |
£22,900 |
| Adjusted net income above which personal allowances are
tapered |
n/a |
£100,000 |
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National insurance contributions (NICs)
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The lower earnings limit for 2010/11 will increase by £2
to £97 per week. All other main NIC rates and thresholds
are unchanged for 2010/11.
In his 2008 Pre-Budget Report the Chancellor announced that
the main NIC rates would be increased by 0.5% for 2011/12.
In his 2009 Report he announced a further 0.5% increase effective
from 6 April 2011, taking rates to:
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| Employee Class 1 |
12% |
| Employer Class 1 and Class 1 A/B |
13.8% |
| Self-employed Class 4 |
9% |
| Class 1/4 additional rate |
2% |
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With effect from 6 April 2011, the primary threshold and lower
profit limits were to be broadly aligned with the income tax
personal allowance. It has been
announced that these thresholds will be increased by a further £570 to
compensate the lowest earners (up to £20,000) for the increase in Class
1 and 4 rates. |
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Inheritance tax (IHT)
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The Chancellor announced that the inheritance tax allowance
will be frozen at £325,000 for individuals and therefore
a maximum of £650,000 for married couples and civil partners
in 2010/11. |
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Capital gains tax (CGT) |
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There is no change in the annual exempt amount which remains
at £10,100 for individuals and £5,050 for most
trustees.
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Child benefit |
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Child benefit will be increased by 30p to £20.30 per
week from April 2010. |
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State Pension |
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The Pre-Budget Report announced that in April
2010 the level of the basic State Pension will increase by 2.5%,
meaning a full basic State Pension will be worth £97.65
a week. The full couples’ rate for those whose entitlement
is based on their spouse or civil partner’s pension will
increase to £156.15 a week.
These increases are in line with the policy of uprating the
basic State Pension by RPI or 2.5%, whichever is higher.
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Pension Credit |
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There will be an above-indexation increase in
the Pension Credit’s minimum income guarantee to £132.60
for single pensioners and £202.40 for couples in 2009/10. |
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Tax relief on pension contributions |
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Budget 2009 announced that tax relief on pension
contributions would be restricted from April 2011 for individuals
with incomes of £150,000 and over.
The Chancellor has now announced that the income definition
for the £150,000 threshold will include the value of
employer pension contributions.
This will be subject to an income floor so that tax relief
for those with incomes below £130,000 (before the inclusion
of employer pension contributions) will not be restricted.
They will still be subject to the existing annual and lifetime
allowances.
The anti-forestalling measures introduced at Budget 2009 will
be extended from 9 December 2009 so that all those with incomes
of £130,000 and over will be subject to the special annual
allowance.
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Furnished holiday lettings |
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The current furnished holiday lettings provisions
(now applying to UK taxpayers with qualifying lettings elsewhere
in the EEA) will be withdrawn with effect from 6 April 2010.
From that date, furnished holiday lettings will be dealt with
under the normal rules for the letting of property, and hence
the following tax reliefs will no longer be available:
- · income tax sideways loss relief and capital allowances
for new expenditure
- capital gains tax entrepreneurs’ relief, business
assets roll-over relief, relief for gifts of business assets;
and
- exemptions for disposals of shares by companies with a
substantial shareholding.
From 6 April 2010 income from furnished holiday lettings will
cease to be relevant income for pension relief purposes.
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Carers |
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Two new provisions affecting carers were announced.
Income tax:
A new tax-free allowance will apply for Shared Lives carers,
from 6 April 2010, replacing the current simplified income
tax arrangements.
The tax-free allowance will be available per household and
consists of:
- £10,000 fixed amount per tax year
- £200 per week (or part week) per placement
aged under 11; and
- £250 per week (or part week) per placement aged 11
or over.
Qualifying Shared Lives carers whose
total receipts from providing care do not exceed the tax-free
allowance for the year will
be exempt from income tax on their income from providing Shared
Lives care. Those whose receipts exceed the tax-free allowance
for the year can choose to pay tax on either the amount by
which their receipts exceed the allowance or on their profits
calculated using the normal tax rules for businesses
Capital gains tax (CGT):
Strictly, the CGT principal private residence (PPR) relief
is not available for any part of the home which is used exclusively
for the purpose of a trade, business, profession or vocation.
Where a person cares for an adult under a local authority placement
scheme, their contract may require them to set aside one or
more rooms for the exclusive use of the adult in their care.
Legislation to be introduced in the 2010 Finance Bill will
remove the potential restriction on the PPR relief, for disposals
on or after 9 December 2009.
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Salary sacrifice – workplace
canteens |
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Measures will be introduced from 6 April 2011
to remove the income tax exemption for meals provided in a canteen
or on the employer’s premises, in cases where the provision
is linked to a salary sacrifice arrangement or a flexible benefits
remuneration arrangement, where the food and drink provided (or
the means of obtaining it) is commensurate with the amount of
income given up. |
