Specialist Tax Centre - July 2010

Annual investment allowance (AIA)

The AIA is fast becoming a political football. It was £50,000 on its introduction from 1 April 2008 and doubled to £100,000 from 1 April 2010. From 1 April 2012 it will reduce to £25,000.

• Entrepreneurs’ relief increased so that there is a new lifetime limit of £5 million taxed at 10%.
• Otherwise, you will now pay CGT at 18% if the gains added to your taxable income do not exceed the basic rate band and 28% on any excess.
• Any gains made from 6 April 2010 to 22 June 2010 do not count as using up the available basic rate band.
• Losses can be set-off against gains in the most beneficial way – as can the annual exemption, which for this tax year stays at £10,100.
• As to whether or not the 18%/28% rates will continue, it is simply stated that the 2011/12 rates will be decided in the Budget 2011. That sounds ominous, and suggests that the changes to the CGT regime are not necessarily permanent.

	Profits
Year to	First £300,000	Over £1.5M
31/3/11 (FY2010)	21%	28%
31/3/12 (FY2011)	20%	27%
31/3/13 (FY2012)	20%	26%
31/3/14 (FY2013)	20%	25%
31/3/15 (FY2014)	20%	245

Higher rate tax relief

Consideration is being given to abolishing the rules in Finance Act 2010 whereby from 6 April 2011 those with income of at least £150,000 in the tax year concerned suffer a loss of some or all of the higher rate tax relief otherwise available.

The new 20% standard rate applies to goods or services to be delivered or performed on or after 4 January 2011.

This special scheme is aimed at helping new businesses in targeted areas of the UK that need it most. During a three year qualifying period, new businesses which start up in these areas will get a substantial reduction in their employer NICs.

1. This tax-favoured investment provides the following main advantages where the property is in the UK or the EEA. They were planned to end on 5 April 2010 but that did not get through the debate on the Finance Bill 2010 so the opportunities are still there:

Income tax allowances and rates

• personal allowance for the under 65’s increasing by £1,000 to £7,475 for 2011/12 , but with the basic rate band reduced so that higher rate taxpayers do not benefit (they of course gradually lose their personal allowance if annual taxable income exceeds £100,000)
• higher rate band level frozen to 2013/14