by Sarah Hamilton of SJH Accounting
As always, the Budget is a trade-off. There are tax savings on the one hand and tax increases on the other. Please read the below questions and answers to gauge how the budget will affect your finances.
Question 1: Will I pay more or less Income Tax as a result of the Budget?
Answer: From 6th April 2011, the Personal Allowance will increase from £6,475 to £7,475. This is the amount of tax free pay you are eligible for before income tax is due. This means that if you earn just under £7,475 in 2011/2012, you will be £200 better off. The Personal Allowance will increase to £8,105 for the 2012/2013 tax year.
The Government has stated that it wants to increase the Personal Allowance eventually, to £10,000, taking 1.1m people out of income tax altogether.
If you are a higher rate tax payer (earning less than £115,000) the threshold for 40% tax will be reduced from £43,875 to £42,475. (The higher rate threshold will not increase in 2012/2013). Therefore, on the one hand you will benefit from the increase in the Personal Allowance and on the other you will be worse off as the 40% tax threshold is triggered by a lower level of earnings.
Question 2: Will I pay more or less National Insurance?
Answer: If you are employed, your Employee National Insurance contributions (Class 1) will increase from 11% to 12%.
If you are self-employed and paying Class 4 National Insurance, your National Insurance Contributions will increase by 1% from 8% to 9%.
Question 3: Will my child benefit change?
Answer: Child benefit is frozen at £20.30 for a first child and £13.40 for each other child.
Question 4: How will the budget affect my child tax credit?
Answer: The second income threshold for the family part of child tax credit will be reduced from £50,000 to £40,000. The payment of £545 to families with new babies will also be reduced.
Question 5: How will the budget affect the tax treatment of my childcare vouchers?
Answer: Read my Childcare Voucher blog for more specific detail. Families who are close to the higher rate tax threshold should apply for childcare vouchers immediately.
Question 6: How will the budget affect my maternity pay?
Answer: The SureStart maternity grant is restricted to the first child.
Question 7: Will my company pay more or less Corporation Tax?
Answer: Corporation tax (large companies) will be reduced from 28% to 26% from 2011/2012 and then 1% thereafter. This will bring it down to 23% the lowest rate in the G7 by 2014-2015. Corporation tax rates will also be reduced for small companies, from 21% to 20%.
If you would like any advice in this area or any other areas of accounting or tax, please contact me on 07834988638 or firstname.lastname@example.org, www.sjhaccounting.co.uk. Sarah Hamilton takes every. care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Sarah Hamilton. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances.
This Article was first published at SJH Accountants
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