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The budget delivered by George Osborne on 23rd March 2011 was set to a backdrop of low growth forecasts, rising inflation and amongst other things a commitment of our Armed Forces to another war. It was therefore no surprise that for most people it does not feel like a generous budget.
For individuals the increase in the personal allowance of Income Tax by £1,000 to £7,475 is matched by the reduction in the basic rate limit by £2,400 to £35,000. As a result basic rate tax payers will be better off but there will be fewer of them as more people will pay Income Tax at a greater rate.
For Capital Gains Tax, following the introduction of a higher 28% rate last June the rates remained unchanged. The annual exempt amount increases with RPI inflation. The Government is going to consult on a proposed merger of Income Tax and National Insurance contributions and though this may be of great benefit to employers there is no indication that it will directly benefit individuals.
Significantly for Cornwall and the South West the proposed changes to the tax rules for furnished holiday lettings are changing. From April 2011 all losses from a furnished holiday letting business can only be offset against income from the same business. It will be interesting to see if this has any significant effect on second home ownership in the region.
One of the more vaunted winners of this year’s budget was the charitable sector. Gift Aid being improved further with increases to donor benefit limits and from April 2013 the reporting obligations for small donations will be reduced – this should greatly reduce the burden of red tap for small charities manned by volunteers. It is also proposed that there should be a 10% Inheritance Tax rate reduction for estates where the deceased individuals leave more than 10% of their net estate to charity. This is significant for two reasons, firstly any erosion of the granite like 40% Inheritance Tax rate is notable and we can only wait and see if this will lead to further changes in the Inheritance Tax rules; secondly for Executors of deceased’s estates this only further complicates the notoriously complex rules and calculations surrounding grossing up provisions where an individual has left part of their residuary estate to charity. It is not yet clear whether this 10% will directly benefit the charities or the other beneficiaries under the estate the latter would also benefit charities as it should encourage more people to include charities in their Will. The Government will consult over the next few months on these all important details.
If you have any questions or would like to discuss the budget please do not hesitate our specialist Private Client and Charity teams in each Coodes branch.
Call us on 0800 328 3282, or complete the form below and we’ll get back to you as soon as possible.
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