Echo: May-2011

Did you feel that the new tax year had hardly started before the holidays were upon us? And what a holiday it's been - we've enjoyed reminiscing about 'The Wedding' - Oh didn't she look beautiful (Kate). How did she ever walk in those shoes? (Victoria Beckham) - being just two of our main preoccupations.

But now, following days of Easter indulgence (thank you to those lovely people who provided the chocolate which we couldn't resist) we are on strict diets, which brings us back to the business in hand - turning our thoughts to the new financial year ahead, finding a new focus and a lighter spring in our business step.

The new Tax Year brings a whole host of new opportunities to consider and a number of important tax changes, borne out of the budget, that come in to force. We are covering these in this newsletter because they impact on both our private and business clients:

Well that's nothing to Ovation's Adrian Kidd. He's planning on playing 72 holes in 24 hours - without a break! Raising money for the amazing Help for Heroes charity, Adrian and his team mates from Bristol Golf Club are planning to play round the clock on June 21st - the date with more hours of daylight than any other in the year - and with Adrian's handicap, he'll need all the time he can get!

If you'd like to know more  or to Sponsor Adrian, please click on this link: www.justgiving.com/Adrian-Kidd0  

Corporation Tax:  Already cut by 2% from April, will fall by 1% in each of the next three years to reach 23%. Bank Levy rate to be adjusted next year to offset the effect of Corporation Tax reduction on banks. 

The small business rate relief scheme: Now extended for an extra year. This is now scheduled to end on 30 September 2012. Under the scheme, eligible rate paying businesses can obtain relief starting at 100% for rates up to £6000  and gradually decreasing for properties with a rateable value between £6,000 and £12,000.

Personal Tax Allowances: Personal tax allowance rises by £630 to £8,105 in April 2012 - a real increase of £48 a year or £126 in cash terms. The Consultation on merging National Insurance and Income Tax continues!

Higher Tax Rate: The 50p tax rate will remain in place but there are indications that this will be temporary measure. In the Chancellor’s own words "….I regard it as a temporary measure.”

EIS: Income Tax relief on Enterprise Investment Scheme increases from 20% to 30% this month.

Non Doms: Charge on non-domiciled taxpayers increases from £30,000 for those here for seven years to £50,000 for those in the country for 12 years, raising more than £200m.

Council Tax: Frozen or reduced this year in every English council.

Entrepreneurs Relief scheme doubles to a lifetime allowance of £10m from April 6th 2011. This is a Capital Gains Tax concession on qualifying business disposals, providing a 10% CGT rate on business sales.

Since its introduction, this popular concession has increased from  £1m to £5m during the 'Emergency Budget" 23rd June 2010 and now to £10m, effective from April 6, 2011.

Small companies' research and development tax credit rises to 200% in April and 225% in 2012.
 

There is no change to the personal nil rate band (NRB) for the tax year ending 5 April 2012, this remains at £325,000 and is currently set to remain at that level until April 2015. Inheritance tax (IHT) is payable at a rate of 40% on transfers of value in excess of the NRB, while some lifetime gifts can attract a 20% IHT charge.

This financial year leaving money to charity becomes a more attractive option. The rate of IHT will be reduced to 36% for estates leaving 10% or more to charity.

A welcome increase in the approved mileage allowance rate (AMAP rates) from 40p to 45p for the first 10,000 business miles.

Good news - no proposals to increase taxes for pensioners! But the Coalition has already said the state pension age will rise from 65 to 66 in 2020, six years earlier than previously proposed.

Employers could find they have employees who may be unable to retire in their mid 60’s unless pension schemes are put in place sooner rather than later to address the situation. Experts are already warning that the "wheels are in motion" for speeding up further changes.

Direct tax is to be indexed by Consumer Prices Index (CPI) rather than the Retail Price Index (RPI) from April 2012 . Traditionally RPI rises more quickly than CPI, which could mean that thresholds beyond which individuals pay taxes will rise slower - their comparable current rates are CPI at 4.5%, RPI at 5.2%. But is there a catch?
 
Government allowances might be rising by CPI, but many of its taxes will rise by RPI, including fuel duty, car tax (VED), Air Passenger Duty, alcohol and tobacco taxes. This could affect future ISA limits. These were indexed to RPI inflation in June 2010, however from 2012 any increase will be in line with the less generous CPI. Is this a tax rise for the future? The changes are calculated to bring an additional £1bn of tax to the Treasury, so the answer is almost certainly YES!
 

The Government have issued details of an Equitable Life Payment Scheme, which will make payments to certain policyholders.  They have set up a web site to provide information to policyholders: http://equitablelifepaymentscheme.independent.gov.uk/

If you have any questions as to how this relates to you, or would like to discuss something on this issue, please do give us a call.

The new ultra competitive 5.75% rate on overseas financing income coming into the UK is part of a package of reforms that make it clear the UK is “open for business”. This is a special tax rate applied for controlled overseas finance companies - seems to have worked for Sir Martin Sorrell, he’s already committed to moving his enterprises back to the UK.  

The Financial Services Authority does not regulate Tax Planning / Advice.
Tax treatment is based on individual circumstances and may be subject to change in the future.