This tax year (2011/12) - from April 2011

• Personal allowance increases by £1,000 to £7,475
• Higher rate tax (40%) starting level reduced to £42,475 –so that higher rate tax payers do not benefit from the increased personal allowance
• NI for employees – rate increase from 11% to 12% - starts to be paid at £7,228 pa
      for employers – rate increases from 12.8% to 13.8%
      for self-employed –rate increases from 8% to 9%
• NI employee additional rate (after the upper earnings limit £42,484pa) increases from 1% to 2%
• Corporation tax for small companies reduced 1% to 20% (up to £300,000profit) -above at 26%
• EIS investment income tax relief increased from 20% to 30%
• Pension investment annual allowance of £50,000 pa (reduced from £255,000 pa). If annual allowance is not used it can be carried forward for 3 years. Similar allowance for company pension and without reference to salary.
• No change to Inheritance Tax threshold of £325,000 – and frozen to 2014/15
• CGT entrepreneurs’ relief so that capital gains are taxed at 10%, instead of 28%, on gains of £10million, increased from £5million.
• R&D expenditure attracts tax relief at 200% - rising from 175%. This is now an even more valuable relief – and it gets bigger next year.
• Extension of the small business rate relief holiday by one additional year to 1 October 2012
• Capital allowances for fixed asset expenditure – annual investment allowance continues at 100% up to £100,000 but reduces next year. Worth making sure that large expenditures are made before March 2012
• use of private car mileage allowance increased from 40p to 45p per mile – still 25p beyond 10,000 miles per annum. An employer can pay the employee 5p per mile (free of tax) for each fellow employee passenger carried

Next tax year (2012/13) – from April 2012

• Personal allowance increases by £630 to £8,105
• 50% income tax rate to be reviewed
• R&D expenditure attracts tax relief at 225% - rising from 200%
• Capital allowances –annual investment allowance reduced from £100,000 to £25,000 (100% write off). Main writing down allowance reduced from 20% to 18%

Next tax year plus one (2013/14) – from April 2013

• Company car benefit in kind rates increase by 1% for vehicles with carbon dioxide emissions 95-219 g/km

Other key points

Furnished holiday lettings were favourably treated as income –both for properties in the UK and EEA. This is withdrawn in this tax year 2011/12. Losses can only be carried forward against future profits. From 2012/13, the property must be available to let for no less than 210 days a year – increased from 140 days per year. Also the property must be let 105 days in the year –increased from 70 days per year. However CGT entrepreneurs’ relief continues to be available taxing capital gains at only 10%.
If a letting property, is let as furnished holiday lettings for at least 12 months before sale, the capital gain should be taxed at 10% instead of 28%.

Company cars are interesting, if the car CO₂ emission level is low (or nil as electric) or for an expensive car when the business mileage is high (over 20,000 miles pa). The tax charge for free fuel is very high and not worthwhile – better to be paid a business mileage rate for fuel.

Tax avoidance The drive to root out tax evasion and counter tax avoidance will continue. Currently there is an offer to plumbers (plumbing, heating and gas installation trades) to disclose undeclared income with low penalties of 0%, 10% or 20% – need to notify by 31 May 2011. In fact anyone may take advantage of this facility. The Revenue now has a huge volume of personal and corporate bank information, which will undoubtedly lead to new investigations.

PAYE There is now a system of charging interest and penalties on late payment of monthly PAYE. Soon the PAYE system will be on line, which is expected to reduce PAYE coding errors

Merging income tax and national insurance There is to be consultation on merging income tax and national insurance. This is a desirable simplification, but is quite difficult.

Business record checks HMRC thinks that the standard of record keeping of small and medium sized businesses is low. It plans to visit and check up to 50,000 businesses annually, starting in the second half of 2011. HMRC is able to impose penalties for significant record keeping failure.

National Insurance Confirmed that there are no intentions for National Insurance on pensions savings and dividends. Good news for companies that remunerate shareholders with small salaries and dividends.

Late filing penalties for self-assessment tax returns The £100 penalty for filing the 2010/11 tax return later than 31 January 2012 is now fixed – before it could not be greater than the tax payable – down to zero. 5% penalty of unpaid tax, due at 31 January, is now payable at each of 1 month after, 6 months after and 12 months after the 31 January.