Budget Summary for 2011

After two Budgets and three Finance Acts in 2010, the 2011 Budget looked as if it might be a relatively mundane affair. In the event, it was anything but. George Osborne revealed a ‘Budget for growth’ with a range of business-friendly measures, including a surprise extra 1% reduction in the main rate of corporation tax and a doubling of the limit for entrepreneurs’ relief. Although the Chancellor had no spare cash to play with – the Budget was fiscally neutral – he managed to produce a 1p per litre cut in fuel costs when a 5p increase had been due from next month. He also confirmed that the 50% income tax rate would be ‘temporary’.

Mr Osborne polished his tax reformist credentials, announcing the abolition of 43 out-dated reliefs and setting in train several major tax consultations. These include a review of the integration of income tax and national insurance contributions (NICs), a topic which many previous Chancellors have considered briefly before kicking into the long grass.

There were some tax rises, generally well hidden from public gaze, such as the sharply increased tax on North Sea oil companies.

Budget highlights

  • The main rate of corporation tax will be cut to 26% from April 2011 and will be reduced by 1% a year thereafter to 23% in 2014.
  • The personal allowance is projected to increase to £8,105 in 2012/13, with a corresponding reduction in the basic rate band to £34,370.
  • Enterprise investment schemes (EISs) and venture capital trusts (VCTs) will be reformed, with an increase in the rate of tax relief on EIS investments from 20% to 30% from April 2011 and a doubling of the EIS investment ceiling from April 2012 along with an increase in the size of companies that can be funded by the schemes and the amounts they can raise.
  • From April 2012, there will be an increase to £50,000 in the annual charge for non-domiciled individuals who have been UK resident for 12 or more years and who wish to benefit from the remittance basis of taxation.
  • Charities will benefit from a variety of measures, including simplification of gift aid and a new inheritance tax relief.
    The lifetime limit for entrepreneurs’ relief will be increased from £5 million to £10 million from 6 April this year.
  • The rate of R&D tax credit for small and medium-sized enterprises (SMEs) will be increased to 200% from April 2011 and to 225% a year later.
  • The Government will consult on the integration of income tax and NICs.