Tax tables 2011-12

December 13, 2010 Leave a comment

Tax tables 2011-12

Posted by AccountingWEB.co.uk in Tax on Thu, 09/12/2010 – 13:32

These tables reflect announcements made on 24 March, 22 June and 2 & 9 December 2010. For more detail on these rates, see Annual uprating of certain tax and tax credits rates and thresholds (112kb PDF)

Income tax, capital gains tax, and inheritance tax

Per year 2010-11 2011-12
Income tax personal and age-related allowances
Personal allowance (age under 65) £6,475 £7,475
Personal allowance (age 65-74) £9,490 £9,940
Personal allowance (age 75 and over) £9,640 £10,090
Married couple’s allowance* (age 75 and over) £6,965 £7,295
Married couple’s allowance* – minimum amount £2,670 £2,800
Income limit for age-related allowances £22,900 £24,000
Income limit for under 65 personal allowance £100,000 £100,000
Blind person’s allowance £1,890 £1,980
Capital gains tax annual exempt amount**
Individuals etc. £10,100 £10,100
Most trustees £5,050 £5,050
Individual inheritance tax allowance £325,000 £325,000
Pension schemes allowances
Annual Allowance £255,000 £50,000
Lifetime Allowance £1,800,000 £1,500,000

* Married couple’s allowance is given at the rate of 10%.

** 2011-12 annual exempt amounts for CGT not yet confirmed.

Income tax: Taxable bands

2010-11 2011-12
Savings starting rate*: 10% 0 – £2,440 0 – £2,560
Basic rate: 20% 0 – £37,400 0 – £35,000
Higher rate: 40% £37,401 – £150,000 £35,001 – £150,000
Additional rate : 50% Over £150,000 Over £150,000

* only available if non savings income is less than this amount

Capital gains tax rates

2010-11 2011-12
Standard rate of CGT 18% 18%
Higher rate (from 23/6/10) 28% 28%
Entrepreneurs’ Relief fraction (to 22/6/10) 4/9 n/a
Rate for Entrepreneurs (from 23/6/10) 10% 10%

 

Corporation tax on profits

£ per year (unless stated) 2010-11 2011-12
£0-£300,000 21% 20%
£300,001 – £1,500,000 Marginal rate Marginal rate
£1,500,001 or more 28% 27%

National insurance contributions

per week (unless stated) 2010-11 2011-12
Lower earnings limit, primary Class 1 £97 £102
Upper earnings limit, primary Class 1 £844 £817
Upper Accruals point £770 £770
Primary threshold £110 £139
Secondary threshold £110 £136
Employees’ primary Class 1 rate between primary threshold and upper earnings limit 11% 12%
Employees’ primary Class 1 rate above upper earnings limit 1% 2%
Employees’ contracted-out rebate – salary-related schemes 1.6% 1.6%
Employees’ contracted-out rebate – money-purchase schemes 1.6% 1.6%
Married women’s reduced rate between primary threshold and upper earnings limit 4.85% 5.85%
Married women’s rate above upper earnings limit 1% 2%
Employers’ secondary Class 1 rate above secondary threshold 12.8% 13.8%
Employers’ contracted-out rebate, salary-related schemes 3.7% 3.7%
Employers’ contracted-out rebate, money-purchase schemes 1.4% 1.4%
Class 2 rate £2.40 £2.50
Class 2 small earnings exception (per year) £5,075 £5,315
Special Class 2 rate for share fishermen £3.05 £3.15
Special Class 2 rate for volunteer development workers £4.75 £5.10
Class 3 rate (per week) £12.05 £12.60
Class 4 lower profits limit (per year) £5,715 £7,225
Class 4 upper profits limit (per year) £43,875 £42,475
Class 4 rate between lower profits limit and upper profits limit 8% 9%
Class 4 rate above upper profits limit 1% 2%

Working and child tax credits rates

£ per year (unless stated) 2010-11 2011-12
Working Tax Credit
Basic element £1,920 £1,920
Couple and lone parent element £1,890 £1,950
30 hour element £790 £790
Disabled worker element £2,570 £2,650
Severe disability element £1,095 £1,130
50+ Return to work payment (16-29 hours) £1,320 £1,365
50+ Return to work payment (30+ hours) £1,965 £2,030
Childcare element of the Working Tax Credit
Maximum eligible cost for one child £175 pw £175 pw
Maximum eligible cost for two or more children £300 pw £300 pw
Percentage of eligible costs covered 80% 70%
Child Tax Credit
Family element £545 £545
Family element, baby addition* £545 n/a
Child element £2,300 £2,555
Disabled child element £2,715 £2,800
Severely disabled child element £1,095 1,130
Income thresholds and withdrawal rates
First income threshold £6,420 £6,420
First withdrawal rate 39% 41%
Second income threshold £50,000 £40,000
Second withdrawal rate 6.67% 41%
First threshold for those entitled to Child Tax Credit only £16,190 £15,860
Income disregard £25,000 £10,000

* The baby element of the Child Tax Credit will be removed from April 2011.

Individual Savings Account (ISA)

Annual ISA subscription limit
 2010-11 2011-12
Overall limit £10,200 £10,680
of which cash £5,100 £5,340
of which stocks & shares £10,200 £10,680

Stamp taxes and duties

Transfers of land and buildings (consideration paid)
From 1 January 2010

Rate Residential in disadvantaged areas & Non residential Residential outside disadvantaged areas
Total value of consideration
Zero £0 – £150,000 £0 - £125,000
1% Over £150,000 – £250,000 Over £125,000 – £250,000*
3% Over £250,000 – £500,000 Over £250,000 – £500,000
4% Over £500,000 Over £500,000

* First time buyers can claim relief from SDLT on residential transactions up to £250,000 between 25 March 2010 and 25 March 2012

Fuel Duty

The next increase in fuel duty will be implemented in three stages: 1 pence per litre on 1 April 2010, 1 pence per litre on 1 October 2010, and 0.76 pence per litre on 1 January 2011.

 

Filed under Finance, Tax

Finance Bill 2011 at a glance

December 13, 2010 Leave a comment

Posted by AccountingWEB.co.uk in Tax on Fri, 10/12/2010 – 13:26

As part of its new approach to tax policy making, the government published 500+ pages of draft clauses and accompanying explanations on 9 December 2010 for measures that will be included in the Finance Bill 2011.

The Finance Bill 2011 will also legislate the annual changes in rates and duties that were announced previously. With the exception of the Capital Gains Tax threshold for individuals in 2011-12, which has yet to be set (and statutory maternity pay rates that we’re still trying to find), the key tax allowances and rates are set out in our 2011-12 tax tables.
This article details a comprehensive list of published measures, with links to those that are of most relevance to AccountingWEB.co.uk members. Further details are available from the HMRC and Treasury websites.
Key topics
  • Restricting pensions tax relief (HMRC guidance) – the Finance Bill will enact arestriction on pensions tax relief for individuals by reducing the annual allowance from 2011 to £255,000 and the lifetime allowance from 2012 to £1.5m. Further details can be found on the Treasury website.
  • Pensions annuitisation (Treasury PDF 485kb) – the rules requiring members of registered pensions schemes to secure an income by age 75 will be repealed. Further detail is set out in the responses to the consultation document published today. The government intends to publish draft legislation covering this element by February.
  • Retirement savings programme (Treasury PDF 130kb) – legislation will be introduced to deal with unintended tax consequences which arise due to the interaction of Pensions Act 2008 and tax legislation.
  • Disguised remuneration – in a written ministerial statement on 6 December Exchequer Secretary David Gauke explained the government’s plans to crack down on trusts and other third-party employee reward arrangements designed to avoid or defer income tax or NICs. These will include Employee Benefit Trusts and Employer Financed Retirement Benefit Schemes (EFRBS).
  • Group mismatches – groups will not be able to use loans or derivative contracts to generate profits or losses purely as a result of accounting asymmetries.
  • Derecognition of Corporation Tax loan relationships – avoidance of Corporation Tax will not be possible for loan relationships and derivative contracts not fully recognised for accounting purposes. This was confirmed in the written ministerial statement on 6 December 2010.
  • Functional currency switch schemes – rules tightened to counter avoidance involving changes in the functional currency of an investment company. Investment companies will be able to elect for a functional currency for tax purposes other than that in the accounts.
  • VAT supply splitting – printed matter connected to services provided, but sourced from different suppliers will no longer be zero-rated.
  • Financial securities for PAYE – proposals put forward for consultation to let HMRC take a security from employers for PAYE and NICs that is seriously at risk.
  • Data-gathering powers – bulk information gathering powers planned to enable HMRC to carry out cross-industry analyses.

 

 

 

Filed under Business help, Finance, Tax

Top tips for better working capital management

December 8, 2010 Leave a comment

Top tips for better working capital management

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Posted by Hugh Williams in In practice, In business on Mon, 06/12/2010 – 14:44

 

Cash is the number one priority for businesses and yet many CFOs are afraid of leading the charge when it comes to working capital management initiatives. Hugh Williams explains why it’s time for CFOs to get their hands dirty.

A lot of firms are currently undertaking some initiative to better manage their working capital because they cannot fund their businesses in the same way as they did in the past. Credit is either too difficult to get or much more expensive than before. Most have taken short term measures to stem the flow of cash (paying suppliers more slowly, getting money in faster from customers, and indeed cutting jobs) but these measures are running out of steam and are bad for long-term business relationships and for the wider economy.

Successfully managing working capital requires an executive sponsor who can mediate across a range of operational and financial functions, and it’s the CFO who has the best chance to lead this effort and make it work. Unfortunately for many of them, this falls outside their comfort zone, since it requires complex planning skills, and as a result many businesses are missing a huge opportunity to improve their profits.

The low-hanging fruit
Most working capital management initiatives nowadays focus on finance wanting to get its hands on the cash tied up in finished goods stock and anywhere else that they have significant inventories – and who can blame them? However, CFOs need to bear in mind that excess stock is just a symptom of poor internal policies, silo-based behaviour, cross-functional mistrust, and blind risk-taking. So getting out the big scissors to cut stock will not stop it from coming back, yet it will unwittingly create significant supply chain problems for the business which will far outweigh the temporary savings that have just been made.

In some cases there are massive shortages of supply (and lost sales) because businesses have cut people (for people, read capacity); poor customer service and product availability because stocks have been cut blindly; and badly controlled new product introduction (lost sales, obsolete stocks) because demand and supply chain planning is poor.

Conflicting KPIs are the greatest enemy of successful integrated business planning (IBP). In most companies management gives each departmental silo in the business a target to achieve that it is hoped will drive the business towards its goal.

Dr Eli Goldratt, author of The Goal, once said, “The sum of the local optimums does not equal the global optimum”. There are examples almost everywhere where businesses still think this is the way to manage and it usually doesn’t work. “A fair day’s work for a fair day’s pay,” they argue. Yes, but only to produce something the customer wants today, not at some point in the future. That’s why we have so much stock!

Finding the high-hanging fruit
If CFOs want better working capital management, they must step forward to lead end-to-end supply chain management, and not just issue unrealistic dictates – or worse still, wait to count the cost. They must understand, embrace and drive forward IBP and really get involved in the value or supply chain rather than marginalising this as some kind of ‘trucks’ and ‘sheds’ logistics planning to delegate downstream.

Today, IBP depends on purging the silo mentality and removing departmental KPIs that are local optimums. Sales and operations, for example, work at cross-purposes in too many companies and become adversaries – this needs to stop. These should be replaced by performance measures and drivers that make everyone work together towards the same end. These measures will beat a path to what I call ‘the high hanging fruit’. We all know the fruit at the top is the best and juiciest, but it also the hardest to get to.

Executive sponsorship is essential. CFOs, supported by their CEOs, must lead the culture change that accompanies integrated planning efforts visibly, vocally and physically. They cannot afford to pay lip service to this, otherwise they will rank alongside those many companies who have tried and failed because top management was not fully engaged. It is a long road that will take patience and persistence and continued investment, probably over a few years. In the first 12 months, you can just about get the process up and running. But those who have done this successfully will tell you they had not realised the potential size of the prize until they got to the top of the tree. The fruit up there is indeed much juicier than the stuff down low that everyone else is picking.

Hugh Williams is the managing director of UK-based Hughenden Consulting and has 25 years experience advising global companies like BP and Baxi on managing working capital.

 

Filed under Business help, Cash, Finance

Guidance on taking over a new company

December 2, 2010 Leave a comment

Guidance on taking over a new company

Often it’s easier and more convenient to take over an existing company rather than opening a new company. Reasons for this vary and the major ones are:

  • The company has a history – This should always be positive.
  • There is a bank account in existence. As opening a bank account can take up to 5 weeks and requires a number of bureaucratic steps this is a major advantage.
  • There may be an overdraft facility which is unused. This is a distinct advantage although the bank may reassess on a sale of the company
  • The company is registered with HMRC as a taxpayer. Again bureaucratic and time consuming steps are eliminated
  • The company is registered for PAYE and VAT with HMRC. Again time and effort is saved.
  • There are supplier terms in place. Suppliers may reassess on a taking over of the company.

There may be more reasons more unique to individual circumstances and these should be reviewed to ensure maximum benefit is gained.

Taking over a company has however some risks if the company traded at any time previously. Broadly but not exclusively they are:

  • Poor credit history, possibly with CCJ’s
  • Legal claims, potential or actual,  against the firm
  • Undisclosed/potential debts against the firm especially HMRC
  • Non-compliance with HR legislation, the Company Act and the various Tax Acts all giving a potential liability against the firm and/or directors
  • Disgruntled employees may create difficulties with the takeover.

If taking over a company where the history is not known and/or trading has or is taklng place a due diligence exercise is a must. These may not uncover all potential issues but will eliminate the obvious ones and reduce the risk. Where trading is taking place it’s best to get professional help with the due diligence.

Where a company is taken over from family many of these issues will become moot but some examination is still recommended.

For more information or help contact Richard Terhorst at 08450095360 or E-Mail Richard@rhtbusiness.com

Filed under Business help, Buy and sell, Finance

Cash flow is the lifeblood of all businesses

December 1, 2010 Leave a comment

Cash flow is the lifeblood of all businesses and accordingly this must enjoy a first priority in any management team. The basic cash flow rules are;

  1. Always ensure there is cash

Running out of cash will result in business failure. If the business does not generate enough cash then borrow if possible. Note your cash flow projections must include repaying any loan taken.

  1. Cash Is King.

Manage it as it is very unforgiving if you do not. It keeps the business alive.

  1. 3. Know Your Cash Balance.

Always know your cash balance and most importantly it is not the balance what is shown on your bank statement. Even the most experienced person will fail if they are making business decisions using inaccurate or incomplete cash balances.

  1. 4. The bank balance is not the cash

The true cash balance is that which is in your books. Bank and cash balance are two different things. They are rarely the same.

  1. 5. If not you get someone else

A true cash balance can only be obtained by keeping your cash book right up to date. If you cannot do it or have the time get someone else. Remember know your cash balance.

  1. 6. Cash forecasting

Financial people  use a 13 week rolling cash forecast. Even with the cash difficult to predict,t it is amazing how a 13 week forecast identifies pinch points. This is a start of managing your business and not being managed by it.

  1. 7. Have cash flow projections and planning

Plan your weekly and monthly cash flow in and outs. Weekly planning allows you to talk to suppliers helping you over pinch points.

  1. 8. Cash flow problems do not just happen

Many SME owners are surprised when hitting a cash flow problem because they failed to anticipate and plan to deal with it. Always do your projections working from up to date and accurate data. The surprise will then be how relitavely easily it was to get through the pinch point.

  1. 9. Use expertise

Not all SME owners are comfortable with figures or have the time. Bookkeepers often are well capable but get real expertise to help or oversee. Wrong information will lead to wrong decisions.

Once managing your cash flow you can concentrate on your customers who are the cash generators in the business. Focus your talents on them and through cash management reduce the worries cash flow may give.

Should you want or need more help in cash flow planning and/or forecasting then call;

Richard Terhorst at 08450095360 or E-Mail at Richard@rhtbusiness.com

 

Filed under Business help, Cash, Finance, Forecasting

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