There was a collective shudder amongst all owner-managed company directors upon the mention of the possible integration of income tax and national insurance contributions. The aim is to remove distortions, reduce burdens on business and improve fairness. The Government will consult this year on the options, stages and timing of reform. Is this the moment we have all feared? Is there going to be a national insurance charge on dividends and inflict the killer blow on small company owners.
However, the Government have stated in the Budget Report that they will not extend NIC’s to other forms of income such as pensions, savings and dividends. This is indeed a huge relief.
In fact, and at this point I had to check on-line whether George Osborne himself is not actually George Osborne Limited, as he confirmed that from 6 April 2011 the amount at which an employee, including a director, can earn before being liable to NIC increases from £5,715 to £7,225. As long as earnings exceed £5,304 (2010/11 £5,044) these earnings count towards the employee’s basic state pension.
The personal allowance (for income tax purposes) increases to £7,475 from 6 April 2011 with a further increase to £8,105 in April 2012.
The not so good news is that, as announced last year, from 6 April 2011 the basic rate band reduces from £37,400 to £35,000. This will again reduce by £630 to £34,370 in April 2012.
The measures regarding fuel prices have been well reported and in addition, the tax-free mileage rate for use of an employee’s own vehicle has increased to 45p (or 50p if with a passenger) for the first 10,000 business miles. It remains 25p thereafter.
Other highlights included:
- The reduction in the main rate of corporation tax to 26% from April 2011 and by 1% a year thereafter to 23% in 2014.
- An increase in the rate of tax relief on enterprise investment scheme (EIS) investments from 20% to 30%, and a doubling of the EIS investment ceiling.
- The increase to £50,000 in the annual charge for non-UK domiciled individuals from April 2012 for those who have been resident for 12 years or more and who wish to benefit from the remittance basis of taxation.
- The Government will consult on the introduction of a statutory definition of residence to provide greater certainty for taxpayers.
- The increase in the lifetime limit for entrepreneurs’ relief from £5m to £10m.
- The increase in the rate of Research and Development tax credit for SMEs to 200%.
- The Government commits to making clear improvements in the way IR35 is administered.
- The VAT Registration Limit increase to £73,000 and deregistration level to £71,000.
- CGT Annual Exemption increase to £10,600
If you would like to discuss your tax affairs please get in touch, or if you would like to receive a Macario Lewin 2011/12 Tax Tables booklet please request this via our contacts page on www.macariolewin.com.
Martin Macario is director of Macario Lewin Ltd. The views expressed are his own.
Recent Comments