From 23 June 2010 there will be two main rates of CGT, 18% and 28%, in place of the single rate of 18% for all gains. The rate paid by individuals will depend upon the amount of their total taxable income. Gains qualifying for entrepreneurs’ relief will be taxed at a rate of 10%, and the lifetime limit of gains qualifying for entrepreneurs’ relief will be raised to £5 million (from the previous figure of £2 million). Gains of trustees or personal representatives of deceased persons will be charged at 28%.

A1 Ministers decided to bring in changes immediately so as to provide certainty to investors.

A2 The Government continues to support entrepreneurs by increasing the lifetime limit for entrepreneurs’ relief to £5 million.

A3 You will effectively pay 10% on disposal of any qualifying assets throughout the tax year 2010/11, although the method by which this is achieved is different for gains arising before 23 June 2010 and those arising on or after that date.

A4 The Government have decided to introduce two CGT rates to promote fairness in the tax system.

A5 If you are an employee the P60 form you receive from your employer at the end of every year should tell you the total amount of income you have received from your employment. You will have to add to this any other income, such as interest from banks and building societies. For those who must complete a self assessment return the notes to the return will explain how to determine their taxable income and rates of income tax for their return. For full details of current tax rates and limits go to our website on http://www.hmrc.gov.uk/rates/it.htm.

A7 You can set off losses, and the annual exempt amount, in the way which is most beneficial for you unless a specific rule limits the way you can set off the loss in question. (An example is a "clogged" loss on an asset you dispose of to a relative or other "connected person" that can be deducted only from certain types of gain.)

A8 In the great majority of cases CGT private residence relief means there will be no CGT to pay when you sell your home. But it will depend on your circumstances. You can get guidance on private residence relief on our website. Or ask your agent for advice.

A9 Gains on disposals made before 23 June 2010 are chargeable at 18%. Where gains qualify for entrepreneurs’ relief the amount of the gain is reduced by 4/9 and then the net gain is taxed at 18%. This produces an effective tax rate of 10%.

A11 A deferred gain that comes back into charge on or after 23 June 2010 will be chargeable at 18% or 28% depending upon your income tax liability.

A12 Gains arising (or treated as arising) before 23 June 2010 are chargeable at 18%. For gains arising on or after 23 June 2010, the rate will depend upon whether your income exceeds the amount of your basic rate band. If any basic rate band is not used, gains up to the unused amount are chargeable at 18%, and all other gains are chargeable at 28%. If you pay the £30,000 "remittance basis charge", you are deemed to have used up your full lower rate allowance and any gains will be taxed at 28%.

A13 The Chancellor will decide the rates of CGT for 2011-12 in the Budget in 2011.

A15 We will provide guidance in time for people to complete their returns for 2010-11 and we are looking at how we can automate the process as much as possible.

Changes to the personal allowance, basic rate limit and upper earnings limit for NIC

Legislation will be introduced to provide for the following income tax and National Insurance Contributions (NICs) changes for the tax year 2011-12:

Taken together, these measures reduce the tax liability for those on lower incomes and have no impact on most higher rate taxpayers who are employees or self employed and will help employers.

Main Changes to Tax Credits and Child Benefit

Health in Pregnancy Grant - Ending of entitlement

The Health in Pregnancy Grant is a £190 one-off payment to all expectant mothers that is made irrespective of income. The Government considers the universal Grant to be a poor use of limited public funds and it will be abolished to help reduce the deficit in a fair way.

The Government proposes to abolish Health in Pregnancy Grant from 1 January 2011. Women who reach the 25th week of pregnancy before 1 January 2011 will still be entitled to the grant providing they satisfy the conditions of the grant.

Taxation of non-domiciled individuals

The Chancellor has announced that the Government will review the taxation of non-domiciled individuals. This reiterates a statement made previously in the Coalition Agreement.

Change to the standard rate of VAT

Zero rated supplies, such as basic foodstuffs, children’s clothing and books; exempt supplies, such as education and health; and supplies subject to VAT at the reduced 5 per cent rate, such as domestic fuel and power, are not affected by this change.

Anti-forestalling legislation will be included in the Finance Bill 2010 to prevent the 17.5 per cent rate applying to supplies of goods or services that are provided on or after 4 January 2011, subject to certain conditions.

Change to the standard rate of VAT - Anti-Forestalling

Following the increase in the standard rate of VAT from 17.5 per cent to 20 per cent on 4 January 2011 anti-forestalling legislation is included in the Finance Bill 2010 to prevent the 17.5 per cent VAT rate applying to supplies of goods or services provided on or after 4 January 2011, subject to certain conditions.

Draft legislation and an explanatory note for this change have been published on the HMRC web site.

VAT Flat Rate Scheme

As a consequence of the increase of the standard rate of VAT from 17.5 per cent to 20 per cent, the Flat Rate Scheme (FRS) sector flat rates have also been recalculated to reflect the increase.

Some of the thresholds applicable to the scheme have also been revised to reflect the increase in the standard rate of VAT to 20 per cent.

Budget 2010: Businesses

Tuesday 22 June 2010

Main announcements affecting business customers including companies, partnerships and self employed.

In the menu to the left there are separate links to announcements on VAT and other measures relevant to businesses.

All announcements for businesses.

Bank Levy

The Government will introduce a levy based on banks’ balance sheets from 1 January 2011, intended to encourage banks to move to less risky funding profiles.

The Government believes that banks should make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.

The levy is not insurance against failure nor a fund for future resolution, it is a contribution reflective of economic risk.

Final details will be published later this year, following consultation.

Further information:

HM Treasury has published more information (Opens new window)

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Corporation Tax - Rates

The Chancellor has announced that:

legislation will be introduced to cut the main rate of corporation tax (CT) to 27 per cent for the Financial Year (FY) commencing 1 April 2011;
the small profits rate of corporation tax for FY 2011 will be 20 per cent. This will be legislated in Finance Bill 2011; and
there will be further cuts in the main rate in future years: 26 per cent in 2012-13, 25 per cent in 2013–14, 24 per cent in 2014-15.

Futher information:

Budget Note 2

Budget Note 3

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Capital Allowances: Plant and Machinery - Rate Changes

The Government has announced that the rates of writing-down allowances (WDAs) for new and unrelieved expenditure on plant and machinery will be reduced:

from 20 per cent to 18 per cent per annum for expenditure in the main rate pool; and
from 10 per cent to 8 per cent per annum for expenditure in the special rate pool.

Expenditure on long life assets, thermal insulation, integral features and cars with emissions of 160g/km or more (in the case of cars purchased on or after April 2009) is allocated to the special rate pool.

These rate changes will take effect from 1 April 2012 (for corporation tax) or 6 April 2012 (for income tax).

For businesses whose chargeable period spans 1 April (corporation tax) or 6 April 2011 (income tax) there will be a hybrid rate for unrelieved expenditure in any pool, including single asset pools. There will be two hybrid rates, one for expenditure previously relieved at 20 per cent and the second for expenditure previously relieved at 10 per cent.

Annual Investment Allowance - Changes to allowance

The annual Investment Allowance (AIA) allows most businesses, regardless of size, to reduce their taxable profits by the full amount of their annual capital expenditure on most plant or machinery (apart from cars) up to a maximum amount, which is currently £100,000 a year.

The maximum amount of the AIA will be reduced to £25,000 a year with effect from April 2012. Details of the transitional provisions will be published in good time before the reduction takes effect.

New Budget announcements of main changes to rates and allowances in the tax year 2010-11 and the tax year 2011-12.

Announced changes to 2010-11 and 2011-12 rates and allowances for Value Added Tax (VAT), Insurance Premium Tax, income tax, National Insurance Contributions (NICs), indexation of benefits and tax credits, State Pension, Child and Working Tax Credits, Child Benefit, corporation tax on profits, a new bank levy, capital gains tax, cider duty and landline duty are set out below.

Budget announces that the level at which employers start to pay NICs will increase by £21 per week above indexation from April 2011. The value of indexation will be determined by data available in the autumn.

The Government will shortly announce a three-year scheme to exempt new businesses in targeted regions from up to £5,000 of class 1 employer NICs payments, for each of their first 10 employees hired in their first year of business. Subject to meeting the necessary legal requirements, the Government aims to have the scheme up and running by September, but any qualifying new business set up from today will also benefit.

*Class 2 NICs are paid at a weekly flat rate of £2.40 by all self-employed persons. Those with profits less than, or expected to be less than, the level of the small earnings exception may apply for exemption from paying Class 2 contributions.

**The exact figure for Class 2 for 2011-12 will be determined by data available in the autumn.

The Government will use the Consumer Prices Index (CPI) for the price indexation of benefits and tax credits from April 2011. This change will also apply to public service pensions through the statutory link to the indexation of the Second State Pension. The Government is also reviewing how the CPI can be used for the indexation of taxes and duties while protecting revenues.

The Government will uprate the basic State Pension by a triple guarantee of the highest of earnings, prices or 2.5 per cent from April 2011. The CPI will be used as the measure of prices, consistent with the Government's decision to index all benefits and tax credits by the CPI, although the basic State Pension will increase by at least the equivalent of the Retail Prices Index (RPI) in April 2011 to ensure its value is at least as generous as under previous uprating rules. The standard minimum income guarantee in Pension Credit will increase in April 2011 by the cash rise in a full basic State Pension.

Budget announces several changes to the Child and Working Tax Credit. Summarised below are the main changes coming into effect in April 2011. Full details of all changes are available in the Budget document.

The child element of the Child Tax Credit will increase by £150 above CPI in April 2011. The baby element of the Child Tax Credit will be removed from April 2011.

Budget announces annual reductions to the main rate of corporation tax. The main rate of corporation tax will be reduced to 27 per cent in 2011-12, with further reductions to 26 per cent in 2012-13, 25 per cent in 2013-14 and 24 per cent in 2014-15.

Budget also announces a reduction in the small profits rate of corporation tax to 20 per cent from April 2011.

A6 You can work out if you have any available lower band rate left by checking the rates of tax at http://www.hmrc.gov.uk/rates/it.htm. For the tax year 2010/11 most people will start paying higher rate income tax only on income over £43,875 although this will depend on whether you have any other allowances. If your income is below that amount, gains up to the unused amount of the band are chargeable at 18%. Any amounts that exceed any unused amount of the basic rate band are chargeable at 28%. If your income uses up the whole of your basic rate band all your gains are charged at 28%.

With effect from 4 January 2011 the standard rate of Value Added Tax will increase to 20 per cent. VAT	April 2010-11	4 January 2011
Standard rate	17.5%	20%
Reduced rate	5%	5%

The upper earnings limit and the upper profits limit will maintain alignment with the income tax higher rate threshold. Employee and employer rates
Employee (Class 1 primary)				Employer (Class 1 secondary)
Earnings per week	April 2010-11	April 2011-12	April 2010-11		April 2011-12
Below primary threshold / secondary threshold	Nil	Nil	Nil		Nil
Above primary threshold/ secondary threshold*	11%	12%	12.8%		13.8%
Above upper earnings limit	1%	2%	12.8%		13.8%

In addition, there will be changes to the thresholds and withdrawal rates as set out below. Child and Working Tax Credits rates
£ per year (unless stated)	April 2010-11	April 2011-12
Income thresholds and withdrawal rates
First withdrawal rate	39%	41%
Second income threshold	50,000	40,000
Second withdrawal rate	6.67%	41%
Income disregard	25,000	10,000

Budget announces that from 23 June 2010 capital gains tax will rise from 18 to 28 per cent for higher and additional rate taxpayers. The 10 per cent lifetime limit for entrepreneurs’ relief rate will be extended from the first £2 million to the first £5 million of gains made over a lifetime. Capital gains tax	April 2010-11	23 June 2010-11
Standard rate	18%	18%
Higher rate*	n/a	28%
Entrepreneurs’ relief rate	10%	10%
Annual Exempt Amount	£10,100	£10,100
Entrepreneurs’ relief lifetime limit of gains	£2,000,000	£5,000,000