Individuals - Tax Credits, Child Benefit, Personal Tax, National Insurance Contributions

Tax Credits, Child Benefit and Guardian's allowance rates and thresholds for 2010-11

From 6 April 2010:

  • The Child element in Child Tax Credit will increase by £20 above earnings indexation to £2300 per year. An increase of £65 per year overall;
  • The disabled elements of Child Tax Credit will increase by 1.5%;
  • The elements of the Working Tax Credit (except the childcare element) will increase by 1.5%;
  • Maximum amounts for child care, family and baby element for Child Tax Credit, the income disregard, the first and second tax credit threshold and the withdrawal rates remain unchanged; and
  • The income threshold for those on child tax credit only rises to £16,190.

From 12 April 2010:

  • Child Benefit rates and Guardians Allowance will increase by 1.5%.

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Other Tax Credit Announcements

Tax Credits - Joining up of financial support, improving delivery and take-up

A new online service is to be introduced in 2010 to signpost to a whole range of benefits and entitlements. This will be aimed at front line staff and advisors outside Government to alert customers to relevant services.

Notional Entitlement

For people who start living together or separate who report the changes late, HMRC will take into account what they would have been entitled to receive had they reported the change promptly in determining any overpayment from their old tax credits award. When calculating the overpayment, HMRC will offset any Tax Credit award they would have been entitled to had they reported the change promptly. This will start in January 2010. Further details will be set out later in guidance.

Working Tax Credits for the Over 65s

From 6 April 2011, people aged 65 and over will qualify for Working Tax Credits if they work at least 16 hours a week.

Currently those aged 65 and over qualify for Working Tax Credits if:

  • They work 30 hours or more a week;
  • They work 16 hours or more a week and they have dependent children, or qualify for the disability element; and
  • They work 16 hours or more and they are returning to work after being on certain benefits for six months or more (only available to the over 50s)

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Tax Rates and Thresholds

For the tax year 2010/11 all tax allowances and thresholds will be the same as for the current year.

For the tax year 2012/13, the higher rate threshold (the point at which someone starts to pay higher rate tax) will be frozen at the 2011-12 amount. The personal allowance will be increased and the basic rate limit will be reduced by the same amount - See Press Release 2 for more details (Opens new window)

NICs Rates and Thresholds

  • For the tax year 2010/11, with just 2 small exceptions, all NICs rates and thresholds are unchanged from the current year 2009/10.
  • For the tax year 2011/12, in addition to the 0.5% increases to rates already announced at PBR 2008, the Chancellor has announced that there will be a further 0.5% increase to those rates, making a 1% increase in total from 6 April 2011. The primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners - See PBRNote 01

Inheritance Tax

The inheritance tax (IHT) threshold will be frozen at the current level of £325,000 for chargeable transfers of value made on or after 6 April 2010 (it was to have been increased to £350,000).
PBRNote 20

Pensions

The special rules introduced at Budget 2009 to prevent people from making large additional contributions to their pensions before 6 April 2011, have been extended to those with incomes of £130,000 or over from 9 December 2009.

The restriction of higher rate tax relief being introduced from 6 April 2011 which the Government is consulting on, will affect individuals with a 'gross income' of £150,000 or over who save in a registered pension scheme. 'Gross income' includes both the value of the individual's pension contributions and any pension benefit funded by the employer on their behalf.

It is also calculated before any deductions for charitable donations are made. However, there will also be a 'floor', so it will only apply where the individual's income (excluding employer pension contributions) is £130,000 or over. So people who have an income of less than £130,000 are not affected. See PBRNote 18 for more details and also the Pensions Tax Relief - Factsheet (Opens new window) published on 18 December 2009

The Government has also published a consultation document on how the restriction of higher rate tax relief for pension contributions for high-income individuals will be implemented from 6 April 2011. This is available on the HM Treasury website (Opens in new window).

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Other Tax Announcements

Salary Sacrifice Workplace Canteens

From 6 April 2011 the exemption for the benefit of free or subsidised meals will be restricted where an employee has an entitlement to employer-provided free or subsidised meals in conjunction with salary sacrifice or flexible benefits arrangements - See PBRNote 25 for more details

Company Car Tax

  • From 6 April 2012 the current graduated table of company car tax bands will be extended down to a new 10 per cent band, and all CO2 emissions thresholds moved down by 5g/km. This will mean that the 10 per cent band will apply to company cars with CO2 emissions up to 99g/km. Qualifying Low Emissions Cars (QUALECs) will therefore no longer exist as a separate category.
  • The appropriate percentage for electric cars for the purposes of company car tax will be reduced from 9% to 0% for 5 years from April 2010. This will reduce the employee car benefit charge to nil and remove the Class1A NICs charge on employers.
    See PBRNote 26 & PBRNote 27 for more details
  • As from 6 April 2010, the current flat rate for all vans of £3000 will be reduced to nil for electric vans with effect for a period of 5 years. This will reduce the employee van benefit charge to nil and remove the Class1A NICs charge on employers - See PBRNote 29 for more details

Cars and Vans Fuel Benefit Tax Changes

  • The figure used as the basis for calculating the benefit of private fuel received for a company car which is chargeable to tax and Class 1A NICs will be increased from £16900 to £18000 from 6 April 2010.
  • The figure used as the basis for calculating the benefit of private fuel received for a company van which is chargeable to tax and Class 1A NICs is increased from £500 to £550 from 6 April 2010.

Company Car Benefit - Employees in the Motor Trade

Revised guidance on how HMRC is to apply the law in calculating the taxable car benefit for employees in the motor trade has been published. The guidance builds on the existing best practice and produces consistency for employers and employees in the following situations;

  • Test and experimental cars (EIM23651)
  • Demonstrator and courtesy cars: is there a benefit charge at all? (EIM23652)
  • Employees with frequent changes of car ("averaging", EIM23653 onwards)

The revised guidance applies for 2010/11 and later years.

Furnished Holiday Lettings

The furnished holiday lettings (FHL) rules will be withdrawn from 2010-11.

This will mean the tax treatment of FHL businesses will be the same as for other property businesses, and confirms the Budget 2009 announcement to withdraw the FHL rules - See PBRNote 24 for more details

Shared Lives Relief

  • Changes are proposed to the way Shared Lives Carers are taxed from 6 April 2010. A new relief will consist of a tax free allowance. Carers whose Shared Lives earnings are less than the tax free allowance will not be taxed on their income from providing Shared Lives care. Carers whose Shared Lives earnings are more than the tax free allowance have the option to choose a simplified method for calculating their profits - See PBRNote 22 for more details
  • Entitlement to private residence relief (PRR) will be preserved where an adult placement carer uses part of their home exclusively for the purposes of their business as a carer - See PBRNote 16 for more details

Seafarers' Earninings Deduction

Seafarers' Earnings Deduction will be extended to EU and EEA resident seafarers with effect from April 2011 - See PBRNote 23 for more details

Gift Aid

Research into the effect of tax incentives on the level of donations from individuals to charity, informing possible reforms to Gift Aid, has been carried out and will be published on the HMT/HMRC website on 15th December 2009.

Renewable Heat and Feed-In Tariffs

Individual householders who use renewable technology to generate electricity mainly for their own home will not be liable to income tax on feed-in tariffs.

Equitable Liability Extra Statutory Concession

This concession is for taxpayers in receipt of a determination of income or corporation tax who are out of time to file their tax return, and who can demonstrate that the sums charged are excessive. By concession HMRC collect only the sum that would have been due for the period had the taxpayer filed the return on time. As part of the review of ESCs, legislation will be introduced to permit HMRC to continue to apply this treatment provided the relevant conditions are met - See PBRNote 34 for more details.

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