Taxable Rates/Useful Information

 

Income Tax Allowances for 2011/12

• Under 65              £ 7,475
• 65-74                   £ 9,940
• 75 and over           £ 10,090

Please see below for explanations and rates at which income is taxed.

 

Corporation Tax Bands

• £0 - £300,000                                               20%
• £300,001 to £1,500,000                                27.5%
• £1,500,001 and over                                      26%

 

Capital Gains Tax

• Annual Exemption for 2011/12                      £ 10,600

 

Inheritance Tax

• Inheritance Tax threshold for 2011/12           £ 325,000

Tax is payable at 40% on amounts exceeding this threshold, and in most cases the tax due must be paid within six months following the month of death.

 

National Minimum Wage

                                                At Present             From 1st October 2010

 21 Years and over                                                           £5.93

 22 Years and over                   £ 5.80                           

 18 to 20 years                                                                £4.92

 18 to 21 Years                        £ 4.83                             

 16 to 17 Years                        £ 3.57                                £3.64

 

Inland Revenue Approved Mileage Rates

 

From 6 April 2011

First 10,000 miles in the tax year            45p per mile

Thereafter                                            25p per mile

(The tax year runs from the 6th April to the following 5th April)

Any payments of mileage that exceed these rates will be assumed to be additional income and will have to be taxed.

 

VAT Registration

The VAT registration limit as of the 1st April 2011 is £73,000.

You must register for VAT if your turnover in the previous 12 months has exceeded this limit, or if you expect that your VAT taxable turnover in the next month alone will exceed the limit.

The present rate of VAT is 20% as of 4th January 2011.

A business can de-register for VAT if their VAT-inclusive turnover for 12 months has been less than or equal to £71,000, or there is an expectation that it will fall below this limit in the next 12 months.

 

 

 

 

Explanations and Further Information

 

Income Tax

Introduction

Income Tax is the tax that is payable by an individual on his or her personal income.  The majority of the population pay this tax by way of the Pay As You Earn (PAYE) scheme, e.g. your employer deducts the tax out of your wage and you receive the net amount.

Other individuals have Self-Employed income from conducting a business as a sole trader or partnership.  These individuals have to complete an annual tax return that is submitted to HM Revenue and Customs by the 31st January following the tax year.  E.g for income earned in the tax year 2010/11, the tax return and outstanding tax is due by 31st January 2012.

Some individuals who are taxed through the PAYE Scheme will also have to complete a tax return due to them having income not already taxed through the PAYE Scheme, e.g rental property, savings and dividends.

 

Rates and Allowances

Each UK resident individual is entitled to earn a certain amount of income each tax year and have no tax to pay on that income, this is known as the personal allowance.

These are the personal allowances for the tax year 2011/12:

• Under 65            £ 7,475
• 65 to 74             £ 9,940
• 75 and over        £10,090

Any income earned above the personal allowance, will be taxed at a specific rate dependent on the type of income.  This is commonly self-employed, employed, rental, savings or dividend income.

The following rates of tax apply:

Self-employed, employed and rental income:

• £0 - 35,000                       20%
• £37,401 - £150,000            40%
• £150,001 and above           50%

Savings income:

• £0 - 2,560                          10%
• £2,560 - 35,000                   20%
• £35,001 - £150,000              40%
• £150,001 and above              50%

Dividend Income:

• £0 - 35,000                        10%
• £35,001 - £150,000             32.5%
• £150,001 and above            42.5%

 

Corporation Tax

Corporation Tax is payable on profits earned by limited companies.  The rate at which the business pays tax is dependent on the amount of net profit a company earns in it's accounting period.

The following are the rates payable for each band of profit for 2011/2012:

• £0 - £300,000                                      20%
• £300,001 - £1,500,000                          27.5%
• £1,500,001 and over                             26%

Where the same people control more than one company, then for each company they control the above bands of profit are divided by the number of companies under common control. 

The 2010/2011 Corporation Tax bands were the same.

Any Corporation Tax due must be paid to HM Revenue and Customs by 9 months after the end of the accounting period, e.g if a company's year end was 31 March 2011, you must have paid your Corporation Tax by the 1st January 2012.

 

 

Capital Gains Tax

Introduction

Capital Gains Tax (CGT) is a tax payable by individuals where they sell a non-stock asset at a profit.  Common assets that attract a CGT charge are property used in a business or rented out, shares and goodwill.

Assets that exempt from Capital Gains Tax include your principal private residence and ISA's. 

 

Annual Exemption

Every individual resident in the UK is entitled to an Annual Exemption, for the year 2011/12 this exemption is £10,600.

Total Capital Gains exceeding the annual exemption are charged at a rate of 18% up to 23 June 2010 or after that date 18% up to the limit of basic rate band (if any) and 28% on gains above that limit, although Entrepreneurs' Relief may be available.

 

Entrepreneurs' Relief

Where Entrepreneurs' Relief applies, gainsbefore 23 June 2010 are reduced by 4/9 and charged at 18%; qualifying gains on or after 23 June 2010 are charged at 10% (with no 4/9 reduction).

This relief is only available to individuals, and the disposal must satisfy the following conditions:

• The disposal is of the whole or a distinct part of your business.
• The disposal is of assets following the cessation of your business
• The disposal of shares in a personal trading company (where you own at least 5% of the voting rights and you work in the Company).
•  There is an 'associated disposal', generally meaning that you have reduced your interest in the business, e.g. reduced shareholding in a limited comapny, or reduced your profit share in a partnership.
• All of the above must have been owned for at least 1 year prior to the disposal.

This relief is subject to a £10 million lifetime limit on qualifying disposals from the 6th April 2011. The time limit for a claim is 12 months from the 31st January following the tax year in which the qualifying disposal is made. E.g. made a qualifying disposal in June 2010, the claim for Entrepreneurs' Relief would have to be made by 31st January 2013.

Companies

Capital Gains made by companies are charged to Corporation Tax at the rates shown earlier.  Where companies sell assets which give rise to Capital Gains, the cost price of each asset is index-linked from the date of purchase to the date of disposal.

Companies are not eligible for the Annual Exemption or Entrepreneurs' Relief.