TAX CHANGES IN 2010/11

Taxes are going up from 6 April 2010.  

Income Tax 

The most publicized tax changes this year are for income tax, with the top rate increasing to 50% on earnings in excess of £150,000.  

However, personal allowances are also being reduced by £1 for every £2 of income above £100,000. As the personal allowance is £6,475, this means there is effectively a marginal tax rate of 60% on income between £100,000 and £112,950, above which you will no longer have a personal allowance. 

Pension contributions 

There are also restrictions on the tax relief on pension contributions for high earners (over £150k). These are not due to come into force until 2011. However, there are provisions to discourage you from topping up you fund between now and then. 

National insurance contributions 

All NI rates will increase by 0.5% from 6 April 2011. This will increase costs for employers and at the same time reduce take-home pay for employees. 

Capital Gains Tax 

The rate of capital gains tax is now 28% (up from 18% previously).

Capital Allowances 

The Annual Investment Allowance has been cut from £100,000 to £25,000. Rates of capital allowances have also been reduced, so capital expenditure becomes less interesting.

This is obviously just a summary of the tax changes being introduced or contemplated.

Always speak to your accountant before making decisions about tax, or contact us.