The annual exemption for the 2011/2012 tax year is increased by £500 to £10,600. The rates of 18% for basic taxpayers and 28% for higher rate tax payers remain unchanged. The 10% rate that applies to gains on the disposal of certain business assets will see the lifetime limit double to £10 million.
The nil rate band remain frozen at £325,000, but the rate at which inheritance tax is charged will reduce from 40% to 36% where an individual leaves at least 10% of his estate to charity
The complex anti forestalling legislation introduced by the previous government ends on 5th April 2011. A simplified system takes effect from 6th April 2011. The maximum contributions attracting full tax relief will be £50,000 per annum and relief not utilised in one year can be carried forward for up to two years. The pensions cap which is currently £1,800,000 will reduce to £1,500,000 with effect from 6th April 2012.
It is no longer compulsory to purchase an annuity so long as a suitable drawdown arrangement is in place. A person who has pension income of at least £20,000 per annum can choose to have the remainder of any pension funds paid to him in full, but subject to income tax.
From 6th April 2011 the Individual Savings Account (ISA) limit increases to £10,680 of which up to £5,340 can be held as cash. Parents of children who have a child trust fund can contribute up to £1,200 per annum without any liability to tax on any income or growth earned. Parents of children who do not have a Child Trust Fund will be able to contribute to a Junior ISA.
There are increases in the amounts that an individual can invest in Venture Capital Trusts and the Enterprise Investment Scheme, and the rate of tax relief for Enterprise Investment Scheme investments will increase from 20% to 30% from 6th April 2011.