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Business Tax Changes 2011/12

Newsletter issue - December 2010.

Corporation Tax

The small profits rate of corporation tax will fall by 1% to 20% from 1 April 2011.This rate applies to profits of up to £300,000 if there are no associated companies. The corporation tax rate for large companies with profits over £1.5million will also fall by 1% to 27%, making the marginal rate for profits between those limits 28.75%. The main rate for larger companies will also fall by 1% in each of the following 3 years down to 24% in the year beginning 1 April 2014.

Capital Allowances

Capital allowances will be reduced with effect from 1 April 2012 (6 April 2012 for income tax purposes), as follows:

  • Main pool writing down allowance - reduced from 20% to 18%
  • Special rate pool writing down allowance - reduced from 10% to 8%
  • Annual Investment Allowance (AIA) maximum investment - reduced from £100,000 to £25,000

Where expenditure on integral features, plant and equipment (excluding cars) is within the annual investment allowance, the business can claim a 100% deduction for those costs in the year bought.

NI

From 6 April 2011 the rates for NI contributions will be increasing by 1% and the new rates become...

  • Employer's class 1 above secondary threshold: 13.8%
  • Employee's class 1 above primary threshold and below upper earnings limit: 12%
  • Employee's class 1 above upper earnings limit: 2%
  • Self-employed class 4: 9%
  • Self-employed class 4 additional rate: 2%

The reduced rates of NI for contracted out contributions for employers and employees have not been confirmed as yet.

From 6 April 2011 if you are self-employed you will be able to pay your class 2 NICs in two instalments on 31 January and 31 July, the same dates as your income tax payments on account are due. You can continue to pay your class 2 NIC by monthly direct debit if you wish, but there will be a break in DD requests by HMRC from April 2011 to August 2011.