Budget Headlines

Capital Gains Tax

From 23 June, there will be three rates of Capital Gains Tax; 10%, 18% and a new 28%.

For basic and lower rate taxpayers, business assets eligible for Entrepreneurs' Relief will be taxed at 10% and all other assets at 18%.

For higher rate taxpayers the rates will be 10% for business assets eligible for ER and 28% for all other assets.

For Trustees the rate will be 28% (unless ER is available).

For Personal Representatives the rate will be 28%.

Where a taxpayer has a mix of pre and post change gains, the pre 23 June gains will not use up any basic rate band remaining.

Gains previously deferred under the old regime which crystallise in the new regime (e.g. where EIS relief has been claimed) will be taxed at the new rates.

The lifetime limit on gains eligible for ER will increase from £2m to £5m from 23 June. There have been no changes to the definitions of assets which qualify for ER.

The annual exemption will remain at £10,100 this year. There will be no reintroduction of taper relief or indexation allowance.

Furnished Holiday Lettings (FHL)

The special rules applicable to FHL have been reinstated. However, there will be a consultation over the summer to consider the tax treatment of FHL which should apply from 6 April 2011.

Corporation tax rates

Corporation tax rates will be reduced. The main rate will fall as follows:

• From 1 April 2011 - 27% • From 1 April 2012 - 26% • From 1 April 2013 - 25% • From 1 April 2014 - 24%

The Small Companies' Rate will be reduced from 21% to 20% from 1 April 2011.

VAT

The standard rate of VAT will increase from 17.5% to 20% with effect from 4 January 2011.

Capital allowances

The rates of writing down allowance for plant and machinery will be reduced from 20% to 18% effective from 1 April 2012 for companies and 6 April 2012 for those businesses liable to income tax.

The allowances applicable to long life and other special rate pool assets will reduce from 10% to 8% from the same dates.

The annual investment allowance which is currently £100,000 per annum will be reduced to £25,000 from April 2012.

Personal allowances

The personal allowance will increase from £6,475 to £7,475 from 6 April 2011. However, the basic rate limit will be adjusted so that higher rate taxpayers do not benefit from the change.

National Insurance Contributions (NICs)

There will be a reduction in NICs for new businesses that start up in this area for a three year period.

During this period, employers will be exempt from the first £5,000 of Class 1 Employer NICs due in the first 12 months of employment. This applies to each of the first 10 employees hired in the first year of business.

The scheme will apply to new businesses set up from today although the precise rules will not be known until later this year.

Purchase of annuity

The requirement to buy an annuity or otherwise secure a pension income at age 75 will be abolished from 2011/12. For individuals who have not reached age 75 by 22 June 2010, the age will be increased to 77. There will be a consultation on further changes to be introduced from 2011/12.

Non-domiciled individuals

The Chancellor has confirmed that a review of the tax treatment of non-domiciled individuals will be undertaken by the Government.

IR35

The Government has stated that it remains committed to a review of the IR35 rules and the taxation of small businesses. They intend to announce further details shortly.

General Anti-Avoidance Rule (GAAR)

The Government will informally consult on whether a GAAR should be introduced as part of the wider attack on tax avoidance.