TAX UPDATE

INCOME TAX RATES 2011/12

The Personal Allowance for 2011/12 has increased to £7,475 for individuals below 65 years old. The Personal Allowance for people aged 65 to 74 is £9,490. The Personal Allowance for people aged 75 and above is £10,090. The income limit for aged related allowances is £24,000. These allowances reduce where the income is above the income limit for age-related allowances by £1 for every £2 of income above the limit.
 
The Basic rate of income tax is 20% for income earned up to £35,000, reduced by £2,400. The higher rate of income tax is 40% for income earned from £35,001 to £150,000. Additional rate of 50% is applied for income earned above £150,000.

From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 - by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.

NATIONAL INSURANCE RATES 2011/12

National Insurance for employees has increased to 12% for 2011/12 from 11% in 2010/11. Employee and Employer NICs are paid on income earned over £102 per week. Employer NICs rate has also increased by 1% to 13.8%.

Employees’ primary Class 1 rate above upper earnings limit (£817 per week) is 2% for 2011/12, increased by 1%. Class 4 NICs for self employed profit between £7,225 and £42,475 is 9% for 2011/12 increased from 8% in 2010/11.

Approved Mileage Allowance Payments (AMAPs) has increased from 40 pence per mile to 45 pence per mile for the first 10,000 miles and 25 pence per mile thereafter. In addition to claiming AMAPs rates, an allowance for passenger payments currently in place for business employees, at 5 pence per passenger per mile, will be extended to volunteers.

CORPORATION TAX

The corporation tax rate for small companies (companies with profits below £300,000) will fall from 21% to 20% from April 2011.

The main rate of corporation tax will be reduced to 26% from April 2011. The rate will then be reduced by a further 1% in each of the following three years, and as a result will be 23% by 2014.
 
CAPITAL ALLOWANCES

Writing Down Allowances (WDAs) will be reduced from 20% to 18% from April 2012. For businesses investing in Plant and Machinery, the Annual Investment Allowance will be reduced from £100,000 to £25,000 from April 2012.

CAPITAL GAIN TAX

The annual exempt amount for Capital Gain Tax (CGT) will increase to £10,600 from 6 April 2012. The annual exempt amount for 2011/12 is £10,100.

INHERITANCE TAX

The Inheritance Tax threshold (or 'Nil Rate Band') is the amount up to which an estate will have no Inheritance Tax to pay is £325,000. From 6 April 2012, the government will introduce a reduced rate of inheritance tax of 36% for estates leaving 10% or more to charity.