Continuing on from the theme of our tax seminars last week, and in the interest of keeping you informed of changes and how the affect you, we thought we’d provide a summary of yesterday’s budget.

Budget Highlights

Individuals

• Personal Allowance: The basic personal allowance for individuals, where available, will increase to £8,105 for the 2012/13 tax year (already set at £7,475 for the forthcoming 2011/12 tax year).
• Capital Gains Tax (CGT): The annual CGT exemption will increase by £500 to £10,600 for 2011/12.
• Enterprise Investment Schemes (EIS): Income tax relief for investment in EIS companies is to be increased from 20% to 30% from 6 April 2011.  Furthermore, the maximum amount that may be invested in one tax year is to be increased to £1,000,000 with effect from 6 April 2012 (currently £500,000).
• Charitable giving will be further encouraged by simplifications to the Gift Aid scheme and, from 6 April 2012, by a reduction in the inheritance tax payable by estates where 10% or more is left to charity.
• The inheritance tax nil rate band will be frozen at its current rate of £325,000 until April 2015.
• The Approved (car) Mileage Allowance Payments (AMAPs) will increase by 5p to 45p per mile from 6 April 2011, for mileage up to 10,000 per year.  The rate will remain at 25p per mile for annual mileage over that level.
• Continuing a regular theme from recent Budgets, further targeted reviews of tax avoidance are to be undertaken, and specific legislation introduced.  The Government’s views have been summarised in an important document published today entitled “Tackling Tax Avoidance”.

Non-Domiciles

• The Remittance Basis Charge (RBC), for resident, non-domiciled individuals who wish to be taxed on only foreign income and gains brought to the UK, will be increased to £50,000 for those resident here for twelve years or more.  The RBC will remain at £30,000 for those resident for at least seven years, but less than twelve.   This is expected to take effect from 6 April 2012, but will be confirmed following a consultation period to begin in June 2011.
• A tax charge will no longer arise where a non-domiciled individual remits overseas income or gains for the purposes of commercial investment in a UK business.  This is again likely to take effect from 6 April 2012.
• A consultation exercise is to be undertaken to consider the introduction of a statutory residence test for tax purposes, with a view to providing clarity for taxpayers.

Corporate

• Entrepreneurs Relief: The lifetime CGT Entrepreneurs’ Relief limit will be increased from £5,000,000 to £10,000,000 with effect from 6 April 2011.
• Corporation Tax: The main rate of corporation tax, currently 28%, will reduce to 26% with effect from April 2011, and then by 1% each year thereafter, down to 23% by 2014.  As previously announced, the small profits rate will reduce by 1% to 20% from April 2011.
• Amalgamation of Tax and National Insurance: A further, and more detailed consultation is to be undertaken on the amalgamation of the tax and national insurance regimes.
• To encourage businesses to use ultra low carbon cars, company car tax will be frozen from April 2013 for cars emitting less than 95g/km. Tax charges for vehicles emitting in excess of this will continue to rise by 1 percentage point from the same date.
• Twenty-one new Enterprise Zones, with specific, detailed tax breaks available, are to be created.

The above lists are of course, far from exhaustive and based on the information so far available.  As ever, further details will only emerge over the coming weeks as the Finance Bill passes through Parliament, but we hope this is a useful starting point.  Please get in touch if you have any queries or would like additional information.