Budget 2011: The key tax changes

The Treasury will unveil a number of new tax changes to be introduced in 2011. Here are the key measures:

For a full overview of HMRC tax legislation and rates, click HERE.

Personal taxes, NI contributions and CGT

Income tax and NI

EISs and VCTs - Legislation will be introduced in Finance Bill 2011 to increase the rate of income tax relief given under the Enterprise Investment Scheme (EIS) from 20% to 30% with effect from 6 April 2011, subject to State aid approval. Further changes are planned in Finance Bill 2012.

CGT

Entrepreneurs' relief - Legislation will be included in Finance Bill 2011 to increase the lifetime limit on gains qualifying for entrepreneurs' relief from £5m to £10m with effect from 6 April 2011. Qualifying gains are taxed at a rate of 10%.

CGT annual exempt amount - The annual exempt amount for CGT will increase in line with statutory indexation to £10,600 with effect from 6 April 2011. Legislation will also be introduced in Finance Bill 2011 to make a technical change to simplify the procedure for indexing the CGT annual exempt amount for years where indexation does not require an increase.

This change ensures the previous tax year's amount will continue to apply for future years unless it is again increased by indexation or Parliament sets a different figure. The formula for indexing the exempt amount is unchanged.

Corporation Tax

Legislation will be introduced in Finance Bill 2011 to reduce:
• the main rate of corporation tax to 26% for the financial year commencing 1 April 2011;
• the main rate of corporation tax to 25% for the financial year
commencing 1 April 2012; and
• the small profits rate of corporation tax to 20% from the financial year
commencing 1 April 2011.

Taxation of Financial Services Sector

Bank Levy - The Bank Levy rates will be increased from 1 January 2012 onwards from those included in the draft legislation published on 9 December 2010 to offset the benefit of the further decrease in corporation tax.

The rates for 2012 onwards will now be 0.078% for short-term chargeable liabilities and 0.039% for long-term chargeable equity and liabilities.

The Financial Services and Markets Act 2000 (Regulated Activities)
(Amendment) Order 2010 - This order, which came into force on 24 February 2010, unintentionally created a number of potential adverse consequences for the tax and regulatory treatment of some types of debt securities. Legislation will be introduced in Finance Bill 2011 to ensure that no unintended tax consequences arise for the potentially affected debt securities between the issue of the Order on 24 February 2010 and remedying amendments that came into force on 16 February 2011.

The unintended consequences are that certain securities may be unable to qualify for the loan capital exemption from stamp duty and the companies that issue them may be unable to qualify for the corporation tax securitisation company regulations.

Business Rates

Business rate discounts in Enterprise Zones - At the Budget, the Government announced the creation of 21 new Enterprise Zones. The Government will offer up to 100% business rate discount for five years to businesses located in Enterprise Zones.

Extend small business rate relief (SBRR) holiday - The SBRR holiday will be extended by one year from 1 October 2011.

Charities and Charitable Giving

Gift Aid donor benefit limits - Legislation will be introduced in Finance Bill 2011 to increase, from £500 to £2,500, the maximum value of the benefits that individuals and companies may receive as a result of making a donation to a charity of more than £10,000 under Gift Aid.

The new limit will be subject to the existing rule that the benefit must not exceed 5% of the gift.

HMRC will also publish revised guidance in April 2011 on Gift Aid benefits to clarify a number of issues and misunderstandings that have become apparent following discussions with stakeholders.