Budget 2010 Rates and Allowances
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Press Notice 2
Rates and allowances
New Budget announcements of main changes to rates and
allowances in the tax year 2010-11 and the tax year 2011-12.
Announced changes to 2010-11 and 2011-12 rates and allowances
for Value Added Tax (VAT), Insurance Premium Tax, income tax, National Insurance
Contributions (NICs), indexation of benefits and tax credits, State Pension,
Child and Working Tax Credits, Child Benefit, corporation tax on profits, a new
bank levy, capital gains tax, cider duty and landline duty are set out below.
INDIRECT TAX
Value Added Tax
|
With effect from 4 January 2011 the standard rate of Value
Added Tax will increase to 20 per cent. VAT |
April 2010-11 |
4 January 2011 |
|
Standard rate |
17.5% |
20% |
|
Reduced rate |
5% |
5% |
Budget also announces that sectoral rates for
the VAT Flat Rate Scheme (FRS) will be updated. Details of new sectoral rates
will be available on the HMRC website.
Insurance Premium Tax
|
With effect from 4 January 2011 the standard rate of
Insurance Premium Tax will increase to 6 per cent and the higher rate will
increase to 20 per cent. IPT |
April 2010-11 |
4 January 2011 |
|
Standard rate |
5% |
6% |
|
Higher rate |
17.5% |
20% |
Budget announces that the level at which employers start to
pay NICs will increase by £21 per week above indexation from April 2011. The
value of indexation will be determined by data available in the autumn.
National Insurance Contributions
The Government will shortly announce a three-year scheme to
exempt new businesses in targeted regions from up to £5,000 of class 1 employer
NICs payments, for each of their first 10 employees hired in their first year of
business. Subject to meeting the necessary legal requirements, the Government
aims to have the scheme up and running by September, but any qualifying new
business set up from today will also benefit.
|
The upper earnings limit and the upper profits limit will
maintain alignment with the income tax higher rate threshold. Employee and
employer rates |
|
Employee
(Class 1 primary) |
Employer
(Class 1 secondary) |
|
Earnings per week |
April 2010-11 |
April 2011-12 |
April 2010-11 |
April 2011-12 |
|
Below primary threshold / secondary threshold |
Nil |
Nil |
Nil |
Nil |
|
Above primary threshold/ secondary threshold* |
11% |
12% |
12.8% |
13.8% |
|
Above upper earnings limit |
1% |
2% |
12.8% |
13.8% |
|
Self-employed rates |
|
Class 2 (per week)* |
Class 4 |
|
Profits per year |
April 2010-11 |
April 2011-12 |
April 2010-11 |
April 2011-12 |
|
Below small earnings exception |
Nil |
Nil |
Nil |
Nil |
|
Small earnings exception to lower profits limit |
£2.40 |
Not available ** |
Nil |
Nil |
|
Lower profits limit to upper profits limit |
£2.40 |
Not available ** |
8% |
9% |
|
Above upper profits limit |
£2.40 |
Not available ** |
1% |
2% |
*Class 2 NICs are paid at a weekly flat rate of £2.40 by all
self-employed persons. Those with profits less than, or expected to be less
than, the level of the small earnings exception may apply for exemption from
paying Class 2 contributions.
**The exact figure for Class 2 for 2011-12 will be determined
by data available in the autumn.
Indexation of benefits and tax credits
The Government will use the Consumer Prices Index (CPI) for
the price indexation of benefits and tax credits from April 2011. This change
will also apply to public service pensions through the statutory link to the
indexation of the Second State Pension. The Government is also reviewing how the
CPI can be used for the indexation of taxes and duties while protecting
revenues.
State Pension
The Government will uprate the basic State Pension by a
triple guarantee of the highest of earnings, prices or 2.5 per cent from April
2011. The CPI will be used as the measure of prices, consistent with the
Government's decision to index all benefits and tax credits by the CPI, although
the basic State Pension will increase by at least the equivalent of the Retail
Prices Index (RPI) in April 2011 to ensure its value is at least as generous as
under previous uprating rules. The standard minimum income guarantee in Pension
Credit will increase in April 2011 by the cash rise in a full basic State
Pension.
Child and Working Tax Credit rates
Budget announces several changes to the Child and Working Tax
Credit. Summarised below are the main changes coming into effect in April 2011.
Full details of all changes are available in the Budget document.
The child element of the Child Tax Credit will increase by
£150 above CPI in April 2011. The baby element of the Child Tax Credit will be
removed from April 2011.
|
In addition, there will be changes to the thresholds and
withdrawal rates as set out below. Child and Working Tax Credits rates
|
|
£ per year (unless stated) |
April 2010-11 |
April 2011-12 |
|
Income thresholds and withdrawal rates |
|
First withdrawal rate |
39% |
41% |
|
Second income threshold |
50,000 |
40,000 |
|
Second withdrawal rate |
6.67% |
41% |
|
Income disregard |
25,000 |
10,000 |
BUSINESS AND FINANCIAL SERVICES
Corporation tax
Budget announces annual reductions to the main rate of
corporation tax. The main rate of corporation tax will be reduced to 27 per cent
in 2011-12, with further reductions to 26 per cent in 2012-13, 25 per cent in
2013-14 and 24 per cent in 2014-15.
|
Budget also announces a reduction in the small profits rate
of corporation tax to 20 per cent from April 2011. Corporation tax on
profits |
April 2010-2011 |
April 2011-12 |
|
£0 - £300,000 |
21% |
20%* |
|
£300,001 - £1,500,000 |
Marginal rate |
Marginal rate |
|
£1,500,001 or more |
28% |
27% |
* The small profits rate was due to rise to 22 per cent in
2011-12, as announced originally at Budget 2007 and deferred to 2011-12 at 2009
Pre-Budget Report.
Bank levy
Budget announces that a bank levy based on banks' balance
sheets will be introduced, effective from 1 January 2011. It is proposed that
the levy will be set at a rate of 0.07 per cent, with a lower initial rate of
0.04 per cent in 2011.
CAPITAL, ASSETS AND PROPERTY
Capital gains tax
|
Budget announces that from 23 June 2010 capital gains tax
will rise from 18 to 28 per cent for higher and additional rate taxpayers.
The 10 per cent entrepreneurs’ relief rate will be extendedfrom the first £2
million to the first £5 million of gains made over a lifetime. Capital gains
tax |
April 2010-11 |
23 June 2010-11 |
|
Standard rate |
18% |
18% |
|
Higher rate* |
n/a |
28% |
|
Entrepreneurs’ relief rate |
10% |
10% |
|
Annual Exempt Amount |
£10,100 |
£10,100 |
|
Entrepreneurs’ relief lifetime limit of gains |
£2,000,000 |
£5,000,000 |
*For higher and additional rate tax payers
EXCISE DUTIES
Alcohol duty rates
|
From 30 June 2010, cider duty rates will be reduced as
follows: Alcohol duties |
April 2010-11 |
30 June 2010-11 |
|
Rate £ per hectolitre of product |
|
Still cider and perry: exceeding 1.2% - not exceeding 7.5%
abv. |
36.01 |
33.46 |
|
Still cider and perry: exceeding 7.5% - less than 8.5% abv.
|
54.04 |
50.22 |
|
Sparkling cider and perry: exceeding 1.2% - not exceeding
5.5% abv. |
36.01 |
33.46 |
Landline duty
|
Landline duty will not be implemented. Landline duty
|
As of April 2010, from 1 October 2010 |
As of June 2010, from 1 October 2010 |
|
Rate per fixed line |
50 pence |
N/A |
NOTES
Section 41 of the Tax Credits Act requires a report to be laid before
Parliament each year reviewing the amounts of certain tax credit elements and
thresholds. Section 145 of the Social Security Contributions and Benefits Act
1992 requires an annual review of Child Benefit rates. Section 150 of the Social
Security Administration Act 1992 requires the weekly rate of Guardian’s
Allowance to be increased in line with price.
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