Stability and certainty in the Tax System is the new motto of the coalition government and, therefore, the Draft Finance bill, usually published in February, has appeared two months earlier in December. There are some expected changes; some of which were part of discussions, and you will recognise some of the points from our articles and emails in last few months.

• We no longer live in the world where EBTs, or any other strategy where we can make use of trusts and loans without paying income tax, is acceptable or legal. The Good news is that there are no announcements about retrospective legislation; the legislation is effective from 6th April 2011. All DNS clients using EBT or any other tax-planning strategy, please rest assured that we will find an alternative and keep you informed.

 

• There is an increase in the Personal Tax free Allowance from £6,475 to £7,475, but a decrease in the Basic Rate Threshold from £37,400 to £35,000.

 

• The Annual Pension Contribution Allowance has been restricted to £50,000 (reduced from the current annual limit of £255,000. The Lifetime allowance has been reduced from £1.8m to £1.5m.

 

• The Childcare Allowance for Higher Rate taxpayers and Additional Tate tax payers has been reduced to £28 per week and £22 per week respectively, so that the weekly tax benefit for the higher earner does not exceed that enjoyed by the Basic Rate taxpayer of £11 per week. The Allowance for Basic Rate taxpayers remains at £55 per week, so there's no change for most of our clients.

 

• There is to be a phased reduction over four years in the Main Rate of Corporation Tax from 28% to 27% from 1 April 2011, and ending on 31 March 2015 at 24%. The Small Companies' Rate will be reduced by 1% to 20% from 1 April 2011.

 

• There is to be a reduction in the Annual Investment allowance to £25,000 per annum. A big loss for many small businesses. This means a significant reduction from the current level of £100,000. This takes effect from April 2012.

 

• Free samples and free gifts for marketing purposes are to be VAT free.

 

To read more visit the HMRC website where the review is available in full to download, alternatively feel free to contact your DNS Account Manager with any concerns or questions you have about this or any other matter relating to your business.