Budget 2011

Below are the major changes for 2011/12 affecting UK based contractors and small businesses as announced in the Budget on 23 March 2011:

Income tax

  • Personal Allowance increased to £7,475.
  • Basic rate limit reduced to £35,000 (equivalent of £31,500 for net dividends).

Companies

  • Corporation tax reduced to 20% for small companies.
  • Mileage allowance increased to 45p for the first 10,000 business miles driven in employees’ private cars.  Secondary rate of 25p for miles in excess of 10,000 remains.
  • IR35 rules are to be clarified by HMRC to remove grey areas.

VAT

  • Registration threshold increased to £73,000 pa.

National Insurance

  • Rate increased for employers and employees to 12% and 13.8% respectively if weekly earnings exceed £136 and £139 respectively.
  • Higher rate of NIC increased to 2%.

Pensions

  • Annual allowance for tax relief on pension contributions reduced to £50,000.

Capital gains tax

  • Annual exemption increased to £10,600.

Furnished holiday lets (FHL)

  • Losses may only be offset against FHL profits.
  • From April 2012 property must be available to let for at least 210 days per year and actually let for at least 105 days per year.

Capital expenditure

  • Allowances reduced to 18% per annum for periods ending on or after 1 April 2012.
  • Annual investment allowance is reduced to £25,000 pa.

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