Review of the March 2011 Budget
On 23 March 2011, the Chancellor, George Osborne, gave his first full Budget since the 2010 General Election.
In summary, the key aspects arising from the Budget are:
- The Government will begin consultations on plans to merge income tax and National Insurance contributions.
- An increase in the personal tax allowance of £630 to £8,105 from April 2012, in addition to the previously announced increase of £1000 to £7,475 from April 2011. The basic rate tax limit will reduce from £35,000 to £34,370 for tax year 2012/2013.
- No changes to the higher rate of income tax, but the Chancellor made it clear he wants to scrap the 50% rate brought in by the previous Government. A review will be carried out to see how much tax revenue is raised by the 50% rate of income tax.
- The Inheritance Tax nil rate band is frozen at £325,000 until April 2015. Changes will be made to the Inheritance Tax rules to encourage charitable giving; a cut in the rate of Inheritance Tax from 40% to 36% (a 10% reduction) for those gifting 10% of their estate to charity.
- Confirmation of previous announcements on restrictions to pensions tax relief and changes to annuitisation / pension income rules.
- The annual ISA investment limit will increase from £10,200 to £10,680 for 2011/2012. The cash element increases from £5,100 to £5,340. From 2012/13 onwards, the ISA subscription limits will move in line annually with the Consumer Prices Index (CPI). Previously, they grew in line with the Retail Price Index (RPI), which is usually higher than CPI.
- Junior ISAs to replace Child Trust Funds from Autumn 2011.
- Corporation Tax (CT) main rate will be cut by 2% in April 2011, not 1% as planned. This is on top of the 1% reductions in each of the next 3 years, reducing CT overall to 23% (the most competitive rate in the G7). For the tax year 2011/12, the main CT rate will be 26%. The smaller companies’ rate also reduces by 1% to 20% from 1 April 2011.
- Enterprise Investment Schemes (EISs) and Venture Capital Trusts (VCTs) are now allowed to invest more in larger companies from April 2012. Subscription limits and rates of tax relief on EISs were also increased to £1 million per year, up from the current limit of £300,000 (from April 2012). From 6 April 2011, the rate of income tax relief given for investment in EIS shares will be increased from 20% to 30%.
- Winter Fuel payments will be reduced by £100 (to £300) for the over 80’s and decreased by £50 (to £200) for the over 60’s.
- The Government will provide £250 million funding for first-time buyers. A new shared equity scheme, First Buy, will be available for first-time buyers who want to purchase a newly-built property but who cannot afford the high deposits.
- The planned inflation rise in fuel duty is to be delayed until 2012. The annual 1p above inflation \"fuel escalator\" rise has been scrapped until 2015 and fuel duty has been cut by 1p per litre.
Please follow the link below for a detailed summary of the key announcements made in the Budget (courtesy of Skandia):
http://www.skandiaknowledgedirect.co.uk/Homepage.html
If you have any questions about the Budget announcements, please contact Howard or Ralph.
