INCOME TAX
- 2010/11 tax allowances and thresholds remain the same as 2009/10.
NATIONAL INSURANCE
The following changes to the national insurance rates and thresholds for future years were are announced as follows:
- For 2010/11 the lower earnings limit will increase by £2 to £97 per week. The special Class 2 rate for Volunteer Development workers will increase by 10p to £4.85 per week as this is linked to the lower earnings limit. All other NIC rates and thresholds are unchanged for 2010/11
- From 2011/12 the main rate of Class 1 and Class 4 NICs will increase by 1% to 12% and 9% respectively. The Class 1 employer rate will be increased by 1% to 13.8%. The increased rate will also apply to Class 1A and Class 1B contributions. The additional rate of Class 1 and Class 4 NICs will also be increased by 1% to 2%
- For 2011/12 the primary threshold and lower profits limit will be increased by £570 above plans announced in the 2008 Pre Budget Report to compensate the lowest earners for the increase in Class 1 and Class 4 rates to help taxpayers earning £20,000 or less.
PENSIONS The Government's intention to restrict tax relief on pension contributions with effect from 6 April 2011 for individuals with gross income of £150,000 or over was announced in the 2009 Budget. The change can now be outlined follows:
- The income definition for the £150,000 threshold will include the value of employer pension contributions
- Individuals with incomes of £130,000 or over whom, on or after 9 December 2009, change their normal pattern of regular pension contributions, or the normal way in which their pension benefits are accrued will be affected. This will only apply if the total pension contributions or benefits accrued exceed the special annual allowance of £20,000 (or in some circumstances £30,000)
- Tax relief for those individuals with incomes below £130,000, before the inclusion of employer's pension contributions will not be restricted unless the existing annual and lifetime allowances are breached
- The anti-forestalling threshold will be amended in Finance Bill 2010 to income of £130,000 or over
- The operative date for these anti-forestalling provisions will be 9 December 2009 for contributions paid under money purchase pension schemes or increases in the rights accrued under defined benefit schemes
- The Government has also published a consultation document on how the restriction of higher rate tax relief for pension contributions for high-income individuals will be implemented from 6 April 2011.
INHERITANCE TAX - The nil rate band for inheritance tax will remain at £325,000 for 2010/11.
- Provisions will be introduced in Finance Bill 2010 to counter two tax avoidance schemes that have been used to reduce the inheritance tax charge arising when property is settled on a trust. The legislation will be effective in cases either where a settlor transfers property into a trust, but retains a future interest in that trust, or alternatively purchases a future interest in the trust, on or after 9 December 2009.
COMPANY CAR TAX
The Finance Bill 2010 will introduce the level of the company car tax charge for 2012/13. The main changes are as follows:
- The current graduated table of company car tax bands will be extended down to a new 10 per cent band
- All CO2 emissions thresholds will be moved down by 5g/km on 6 April 2012 so that the 10 per cent band will apply to company cars with CO2 emissions up to 99g/km
- Qualifying low emissions cars will no longer exist as a separate category
- The appropriate percentage for electric cars for the purposes of company car tax will be reduced from 9% to 0% for 5 years from 6 April 2010. This eliminates the car benefit charge for electric cars in this period.
FUEL BENEFIT - CARS & VANS
- The fuel benefit charge multiplier used as the basis for calculating the benefit of private fuel received for a company car which is chargeable to income tax and Class 1A NICs will increase from £16,900 to £18,000
- The figure used as the basis for calculating the benefit of private fuel received for a company van which is chargeable to income tax and Class 1A NICs will increase from £500 to £550.
FURNISHED HOLIDAY LETTINGS From April 2010 (unincorporated owners from 6 April, corporate owners from 1 April) the favourable tax treatment of furnished holiday lettings (FHL) will be aligned with those for other property businesses. This change affects individuals, partnerships, trustees and companies who have income or capital gains from the commercial letting of furnished holiday accommodation. The changes do not affect hoteliers and bed and breakfast owners.
The FHL rules provide for flexible loss relief, additional capital allowances, certain capital gains reliefs and relevant UK earnings for pension purposes. Thus those who let furnished holiday accommodation will no longer be treated as if they were trading for certain tax purposes. Instead they will be taxed for all tax purposes under the normal rules for property businesses.