The budget was announced on 23 March 2011 and four of the key areas are given below:
- Income tax and national insurance tax rates and thresholds
- Corporation tax and capital allowance rates
- Foreign Branches Taxation
- Other Areas of changes
Income tax rates and national insurance and thresholds
These were likely to change as per the expectation. Personal allowance is increased by £1,000 as well as there is an increase in National Insurance of 1% for employers as well as for employees. So, now the personal allowance (under 65 age) is £7,475 and the National Insurance for the employees has increased to 12% where as the employers’ national insurance is increased to 13.8%. The higher rate threshold is reduced to £35,000 which means from £35,001 to £150,000, the tax rate will be 40% and over £150,000 earning the tax rate is 50%.
Corporation tax and capital allowance rates
This is good news for those who expected only 1% reduction as on 23 March 2011, the new government as announced 2% reduction in the main rate of corporation tax. So the new rate of 26% will be applicable from 1 April 2011. Further reduction of 1% will take place from 1st April 2012 and so the standard rate of 23% will be reached from the 1st April 2014. And this would be the lowest corporation tax rate within the G7 nations.
Foreign Branches Taxation
Foreign branches of the UK resident companies earning profits outside UK and Northern Ireland are announced to be exempt from corporation tax.
Other Areas of changes
Other areas of changes include associated companies for the purposes of small profits rate, capital allowances, annual investment allowance, controlled foreign companies, oil and gas exploration companies, investment trust companies, securities and tax avoidance.
Posted on Mar 23, 2011.