The 2011 Budget

"This is not a tax raising budget, neither rising tax not offering give a ways" These were the words used by Chancellor George Osborne as he began his 2011 Budget address. I have to say I was impressed by the way the Chancellor came across as I feel he delivered a promising and fair Budget. In today's post I will highlight 5 key Tax areas that I feel were the most interesting from a tax point of view.

1. The merger of Tax and National Insurance
As I correctly predicted in yesterday's post, the Chancellor stated that "It is time that we take this historic step to simplify our tax system and make it fit for the modern age be merging Tax and National Insurance”. However you will not see this implemented for a number of years but the government will be setting up a consultation unit to implement this.

2. Further Reduction of Corporation Tax
The Higher Rate of Corporation Tax is to be reduced by 2% from April 2011 reducing the rate to 26%. The small and marginal rates are being reduced by 1%

3. Residency/Non Domicile
As predicted in yesterday's post, HMRC will be introducing a statutory residency test. They have not yet produced details on this yet but I will report back in June when details are published. Furthermore if you have been residence for 12 years in the UK but are not domiciled then you could be subject to an increased Remittance Base Charge of £50,000 increased from £30,000.

4. Personal Allowance Increased
Previously, the government announced income tax changes in April 2011, with the personal allowance - the point at which income tax starts to be paid - rising to £7,475. This will go up by another £630 in 2012.

5. EIS & VCT Investment Rules Relaxed
The Chancellor has increased the tax relief on enterprise investment schemes (EIS) from 20% to 30% and relaxed the investment rules for both EISs and venture capital trusts (VCTs).The total amount that can be invested by a VCT or EIS into an individual company will be increased to £10 million from £1 million

There were of course many items discussed in the Budget but I have decided just to make a mention a few that I found interesting. The main item that has got people speaking is the merger of Tax and National Insurance. I believe this is a good idea however it may be near impossible to implement. We shall see what happens.

For a full budget debrief please email me mitch@ljd.uk.com