Out with the Old and in with the New

Another eventful tax year draws to a close on 5 April and we enter the 2011/12 year. 

After a bleak winter, the increase in VAT to 20%, higher petrol prices and the Governments spending cuts already taking their toll the forthcoming tax changes are likely to cause further concern.

The personal allowance, for those under the age of 65, will be increased by £1,000 from £6,475 to £7,475.  However, the basic rate limit i.e. the amount of taxable income that is charged to income tax at 20% is reduced from £37,400 to £35,000.  Therefore, an individual will now pay tax at 40% rather than 20% when their total taxable income exceeds £42,475 instead of the 2010/11 limit of £43,875.

An effective rate of income of 60% continues to apply for those with earnings between £100,000 and £114,950 (2010/11 £112,950) and taxable income in excess of £150,000 is taxed at 50%. 

National Insurance contributions are also increased for employees, employers and the self employed.

Owner Managed Companies however could see a reduction in their tax liabilities as the corporation tax rate for small companies is to reduce by 1%.  With careful planning it is possible for small company owner managers to save a significant amount of tax compared to what they would have to pay had they continued to trade a sole trader or partnership.  Other advantages of incorporation also apply.

Given the current economic climate it is essential that businesses have a thorough understanding of their accounting and tax obligations and consider a commercial and relevant strategy for the future.

Whether you are a new business or have been trading for many years an independent review by an experienced firm of chartered accountants and chartered tax advisers is good management.

If you would be interested in a review please contact us at info@macariolewin.com, on 01291 621588 or 01792 473992.

www.macariolewin.com