Today's Budget has now been and gone.
The most significant changes in today's Budget, as they'll effect our members, are planned to apply from April 2012. By and large the changes applying for the 2011/2012 tax year are relatively minor, with the exception of the increase in the Entrepreneurs Relief limit.
As always we'll be reviewing these changes and keeping an eye on the consultations being proposed. Over the next week or two we'll look to publish articles considering the impact of the changes in more detail.
Summary of 2011 Budget measures for WPR members
Non Dom Changes
They are consulting on changes that will apply to the non dom regime from April 2012. Unlike in previous budgets where there has been no specific implementation date, this time they are planning to apply the changes from April 2012.
Of course, after the consultation the measures may be heavily watered down or even changed completely, however at the moment they are looking at:
removing the tax charge when non doms remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses. No further details on this yet but this could be a very useful exemption from the remittance rules.
simplifying the administrative burden
increase the existing £30,000 RBC to £50,000 for non doms who have been UK resident for 12 or more years and who claim the remittance basis. The £30,000 charge will be retained for those who have been resident for at least seven of the past nine years and fewer than 12 years.
Statutory Residence Test
The current law on residence status is very unclear. We've had various decisions before the courts and tax tribunal, but the principles used to determine residence status are not applied consistently.
The Government will be consulting on the introduction of a statutory definition of residence to provide greater certainty for taxpayers. Again it is planned that this will be implemented from April 2012.
EIS Relief Changes
Income tax relief is due to be increased to 30% as opposed to 20% from April 2011. Obviously this is planned to encourage investment in small firms.
As from April 2012 they also looking at an increase in the annual amount that can be invested though both EIS and VCTs in an individual company to £10million; and an increase in the limit for EIS investment to £1 million.
Furnished Holiday Lettings
As from April 2011 the FHL regime will extend to the European Economic Area (EEA). From April 2011 loss relief may only be offset against income from the same FHL business. UK losses can relieve UK FHL income only and similarly with the EEA losses.
As from April 2012 the qualifying rules will be changed so that the property must be available to let for at least 210 days and actually let for 105 days.
Increase in Annual Exemption
The annual CGT exemption will be increased from £10,100 to £10,600 for 2011/2012.
Entrepreneurs Relief Lifetime Allowance
This is to be doubled from £5 Million to £10 Million. Therefore you can now benefit from the 10% CGT rate of gains up to £10M.
Corporation Tax Rate Changes
The small company rate was being reduced to 20% for 2011 and the main rate was supposed to reduce to 27%. However the Budget changes mean that for 2011 the main rate will be 26%, not 27%. For 2012 the rate will be 25%.
NIC & Income Tax
There's a consultation on merging income tax and NIC - no firm plans though
Other rates
The income tax and NIC rate and allowances all remain as stated in the 2010 Budget. So we'll see the basic rate band reduced to £35,000, the personal allowance increasing to £7,475 and a 1% increase in NIC.
