The 2011 Budget is fast approaching and due to the level of changes, families have been given generous time with announcements being made within the emergency budget last year as well as the publishing of tax bands and rates last December.
Nearly 50 reforms to the tax and benefits system will come into action from 6th April 2011, although more announcements could creep in and make it into the finance act.
The full scope of changes to income tax were published at the end of last year and give a little to low earners while taking a little from higher earners, well starting with a little for people in the higher rate band and a lot with people in the top rate band. We intregrated the full set of changes into our tax calculators, so head over to the Income Tax Calculator
or Multiple Income Tax Calculator
to see how the changes precisely affect you.
The main things to note are the increase of the personal allowance by £1,000 to £7,475, the decrease of the higher rate threshold by £2,400 to £35,000 and the increase of all national insurance rates by 1%. The national insurance upper earnings limit was also reduced to £817 - so more people will pay the higher primary threshold rate of 12%.
Those fortunate to be buying property worth more than £1m will be unhappy to hear of a new 5 percent stamp duty rate for them. This was the work of Labour's Alistair Darling before he left.
ISA limits will help be rising to help savers. The Annual ISA limit will rise to £10,680 from £10,200 - or £5,340 if just cash and not a mix of stock/shares.
The maximum pension contributions you can claim tax relief upon will be capped at £50,000 - a big decrease from the previous limit of £255,000.
A big change to 'Childcare Vouchers Salary Sacrifice' is coming in to force as of 6th April, unless you join a scheme before then. Normally up to £243 a month can be claimed in tax relief against employer purchased childcare vouchers - this would apply to all income levels. However, this will now be capped to £124 for higher rate earners and £97 for top rate earners. Child benefit was already announced to be frozen for three years - £20.30 for the first child and £13.40 for each additional child.
The Tax Credits system will also see payments decrease faster - try our budget calculator
to see how these will affect you.
Corporation tax will fall by 1% to 27% for main rate profits with the small companies' rate falling by 1% to 20%.
We will publish a full report tomorrow alongside the budget announcements.