Debbie Annells Managing Director AzureTax Ltd 2011 UK Budget Briefing 25 March 2011 The British...

Debbie Annells

Managing Director

AzureTax Ltd

2011 UK Budget Briefing

25 March 2011

The BritishChamber of Commercein Hong Kong

Budget ReportUK Economy

• The economy is predicted to grow by 1.7% (1.2%) this year, 2.5% (2.3%) next year, 2.9% (2.9%) in 2013 and 2014 and 2.8% (2.7%) in 2015.

• The UK is set to miss the previous government’s “golden rule” – described as “disastrous” -of borrowing only to invest over the economic cycle.

• Consumer price inflation is expected to reach 4.4% by the end of 2011 before “returning to target in the medium term”. The inflation target remains at 2%, as measured by the Retail Prices Index.

• Unemployment is forecast to peak this year at 8.1% and then fall for each of the next four years, to reach 6.1% in 2015.

Borrowing/Deficit

• The structural current deficit “should be in balance” one year earlier by 2014-15.

• The measures are forecast to result in public sector net borrowing of £146B (£149bn) this year, £122bn (£116bn) next year, £70bn(£89bn) in 2013-14 and £46bn (£60bn) in 2014-15. Mr Osborne said by 2015-16 the deficit would be £29bn, .

Spending

• The state accounts for “almost half” of all national income which was “completely unsustainable”.

• Reductions in expenditure forecasts not evident however.

(GBP710B v GBP 696B last year)

Government Receipts

Government Spending2011-12

This amounts to approx GBP10,000 per person

Taxes

• From January 4 2011, the main rate of VAT rose from 17.5% to 20%. Current zero-rated items like children’s clothes and magazines will remain. (VAT rate in Germany 19%, in France 19.6%)

• Personal income tax allowance to be increased by £1,000 in April 2011 to £7,475 – worth £170 a year to basic rate taxpayers and to £8,105 in 2012-13.

• Councils offered extra funds to allow them to freeze Council tax for one year from April 2011.

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Merger of Income Tax and National Insurance

• A review of this will be implemented.

• Gift Aid limit to be increased from GBP500 to GBP2,500

• Statutory definition of “residence” to be introduced in 2012

Taxes

• Capital Gains Tax remains in 18% for low and middle-income savers but from midnight 22 June 2010, higher rate taxpayers l pay 28%.

• 10 % reduction in Inheritance Tax, if 10% of estate gifted to charity.

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Tax Policy Framework

• New framework introduced

• Office of Tax Simplification identified 43 tax reliefs which will be abolished.

Income Tax Measures - Previous

• 50% top tax rate, on earnings over GBP150,000,

from 6 April 2010 – a “temporary” measure

• Allowances phased out from GBP100,000

UK Income Tax rates

2010/11 £0 - £2,440 10%*£2,441 - £37,400 20%

£37,401 - £150,000 40% £150,000 and above 50%

2011/12 £0 - £2,560 10%*£2,561 - £35,000 20%

£35,001 and above 40% £150,000 and above 50%

* Savings tax rate except interest is 20%. Dividends 10% / 32.5%/42.5%

(£ per year) 2010/11 2011/12

Personal Allowance (age under 65) 6,475 7,475 Personal Allowance (age 65-74) 9,490 9,940Personal Allowance (age 75 and over) 9,640 10,090

Married couple’s allowance* (age less than 75 and born after 6th April 1935) N/A N/AMarried couple’s allowance* (age 75 and over) 6,965 7,295Married couple’s allowance* minimum amount 2,670 2,800Aged income limit 22,900 24,000

UK Personal Allowances

* Abates by £1 for every £2 of income over £100,000 from 2010/11

Pensions - Previous

Confirming previous announcements…• Salary over GBP180,000 – only basic rate relief• Salary over GBP150,000 – relief reduced on a

sliding scale• In practice those on GBP130,000 or more

maybe affected – salary calculated inclusive of employer pension/charity contributions

• Annual allowance raised to GBP250,000, lifetime allowance to GBP1,800,000 – frozen till 2015/16

• Increased to 28% from midnight on 22nd June 2010

• Split year treatment not clear

• Exempt amount £10,600

• Entrepreneurs relief doubled to £10m from 2011-12

Capital Gains Tax

Cigarettes, Alcohol and Fuel

• Fixed duty reduced to 1p per litre and duty “escalator” stopped

• Equivalent to a saving to 5p per litre

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Tax Avoidance and Tax Evasion

• 14 BN lost in 2008 per HMRC• New strategy paper to be issued• Enforcement of tax debts noticeably stricter• New Tax penalty regime coming in from April 2011,

as previously announced.

Pensions

• The government will accelerate the increase in state pension age to 66.

• There will be regular reviews to increase pension age future.

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Non UK Domiciles

• Remittance Basis Charge increases to £50,000 in year 12 of UK Tax residence.

• No “other” announcements re Non Doms in this Parliament.

• No remittance charge on direct investment into UK businesses.

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Non UK Domicile Statistics

Year Number

2004-05 110,000

2005-06 111,000

2006-07 117,000

2007-08 140,000

2008-09 123,000

The number of individuals who filed a UK self-assessment (SA) tax return and indicated that they were non-domiciled was as follows:

Year £ billion

2004-05 3.3

2005-06 4.0

2006-07 5.0

2007-08 6.9

2008-09 5.9

The total amount of UK income tax and capital gains tax (CGT) paid by individuals who completed an SA return and indicated that they were non-domiciled was as follows:

Business

• From April 2011, the threshold at which employers start to pay National Insurance will rise by £21 per week, above indexation.

• Corporation Tax will be cut this year by 2% to 26% and by 1% annually for the next three years, until it reaches 23%. The small companies’ tax rate will be cut to 20%; and in 2012 is TBA.

• Special Northern Ireland Corporation Tax rate

• R & D tax credits for SMEs 200% (from 175%)

Banks and Petroleum Companies

• The bank levy will be increased to 0.78% from Jan 2012 (0.7%), which will apply to the balance sheets of UK banks and building societies 2011. But smaller banks will not have to pay. • Implemented in France and Germany and the US

• Supplementary oil and gas co charge increases to 32%(20%)

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TOP 10 UK TAX TIPS - 2010/2011

• IHT - Annual gift value £3,000• CGT - Annual Exemption £10,500• Charitable donations for the Tax payer - up to 40% relief• Purchase p+m by business

(furnished holiday lettings loss cannot be outset against other

income after 5th April 2011)• NI and IT increases 6th April, so pay bonuses now.• ISA’s £10,200 ( £5,100 in cash)• VCT £200,000 (30% tax relief)• EIS £500,000 (20% tax relief increased to 30% in Budget).

(58% relief inc CGT)

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TOP 10 UK TAX TIPS – 2010/2011

• Tax refunds for 2006/07 to be claimed (re Higher Rate relief on pensions)

• If income under GBP130,000 for the last 3 years make pension conts up to £255,000; from 5th April its capped at £50,000.

• Non -Residents - check 90 days rule in UK.

• RBC - £30,000 payment arrangements in place by 5th April for

next year’s payment.

Any Questions?