Parse error: syntax error, unexpected '.' in /home2/slade22/public_html/janesmithfinancial.co.uk/wp-content/themes/atahualpa/index.php(1) : regexp code(1) : eval()'d code(4) : eval()'d code on line 1
Budget 2011 A brief summary -

Budget 2011 A brief summary

Annual ISA limits

The annual ISA limit will increase, as planned, to £10,680 for the 2011/12 tax year, and with this increase already confirmed there was unlikely to be any specific changes in the Budget.  However, their future will be impacted by the decision to increase allowances with reference to the Consumer Prices Index rather than the Retail Price Index. As CPI has historically been lower, this may limit year-on-year rises. 

Junior ISAs

Junior Isas were put firmly on the legislative agenda and will be introduced in the 2011 Finance Bill. An outline of the structure of the new wrapper will emerge shortly and they are likely to be available from autumn 2011.  They are expected to have many of the tax incentives of the old Child Trust Funds, only, like current ‘adult’ Isas, without the government contributions.

Enterprise Investment Schemes and Venture Capital Trusts

Enterprise Investment Schemes (EISs) and venture capital trusts (VCTs) also saw some changes. For EISs, initial income tax relief was increased from 20% to 30% from April of this year. From April 2012, there will changes to the rules on allowable companies for both EISs and VCTs. Allowances had been pared back in recent years so these changes go some way to reverse the effects of that.  Both schemes will now be able invest in businesses with up to 250 employees (from a previous limit of 50 employees). The limit on the gross assets of investable companies will also rise, to £15m from £7m. Schemes will now be able to invest up to £10m in one business, up from £2m at present.

Investment trusts

Other proposals to be introduced in the Finance Bill would remove limits on how much an investment trust can invest in any one company and permit these vehicles to make greater use of derivatives. Investment trusts currently have some restrictions on how they derive income and these would also be removed. The government is consulting on real estate investment trusts to decrease the regulatory burden, with any agreed changes then being implemented in the 2012/13 tax year.

“Windfall tax” on oil sector

The other main consideration for investors is the surprise “windfall” tax on the oil sector. Depending on whether oil companies can pass this on to the consumer (which the Chancellor suggested he would not tolerate), this could represent a drain on profits for some of the largest companies in the UK. On Budget day, however, the share prices for these oil giants were unmoved, suggesting the markets believe these companies can easily weather the storm.

Personal Allowance

The personal income tax allowance for individuals was increased by £630 to £8,105 from April 2012, a measure that will also benefit those paying the higher 40% tax rate, though not those pensioners benefiting from the higher age allowances which will remain unchanged.

50% tax rate

The top tax rate of 50% also remains intact for now, although Osborne warned it would cause “lasting damage to our economy if it were to become permanent.”

Merger of income tax and National Insurance?

Interestingly, the Chancellor announced a consultation about possible measures to merge income tax and National Insurance – a move that would ultimately increase transparency.

VAT and NI increases mean you’re unlikely to benefit from tax cuts!

Notwithstanding the higher income tax allowances, any gains to households are likely to be impacted by the effects of higher VAT and National Insurance contributions coupled, where applicable, with reductions in some benefits, details of which have already been announced. Nevertheless, the Chancellor shrugged off any anticipated criticism, stating, “Britain has a plan … and we’re sticking to it.”

Share