Our guide to the 2011 new tax year (it’s bad news for HNWIs)

Wednesday, April 06, 2011 | Posted by: Fiona Cullinan
Categories: Business, Protecting your wealth | Tags: tax, Francesca Lagerberg, capital gains tax, CGT, income tax, HNWI, pensions, NIC, budget, relief, 2011, national insurance contributions, allowances, reliefs, Enterprise Investment Schemes, childcare, ISAs, new tax year, exemptions , Entrepreneurs’ Relief

Here’s quick refresher of tax changes that kick in from today (6 April 2011), by Grant Thornton’s Head of Tax, Francesca Lagerberg, who says that it will be high net worth individuals (HNWIs) who have more to feel down about overall, including limits on how much they can save in their pension funds.

The new tax year starts today. Here are a few of the changes that you will notice:

• The personal allowance will rise by £1,000 to £7,475 for those aged under 65 and will increase from £9,640 to £10,090 for those aged 75 and over.
• The higher earnings threshold will fall from £43,875 to £42,475 in April 2011, which is bad news for middle income earners and will mean there will be more higher rate taxpayers.
• Both employee and employer national insurance contributions will increase by 1%.
• ISAs are now linked to the Retail Price Index and the cash ISA limit for 2011/2012 will rise to £5,340 and the overall ISA allowance will increase to £10,680.
• Childcare vouchers – the weekly amount that you can receive tax free will be restricted for higher rate and additional rate taxpayers to £28 and £22 respectively if you enter the scheme after 5 April 2011.
• The annual allowance for tax-privileged pension savings is coming down substantially from £255,000 to £50,000.
• Capital gains tax annual exemption for individuals will increase from £10,100 to £10,600.
• Income tax relief for investors in Enterprise Investment Schemes (EIS) will rise from 20% to 30% and the amount that can be invested will double to £1 million. These changes are subject to State aid approval. 
• The lifetime limit on capital gains qualifying for Entrepreneurs’ Relief will double to £10 million.
• Compulsory pensions annuitisation by the age of 75 will be scrapped.

If you need to review your tax position, contact your local Grant Thornton adviser or read more on our Private Client pages. 

You might also find these posts useful:

* Catch up on our full Budget 2011 coverage
* Thinking of selling? Entrepreneurs’ Relief could save you up to £900,000 tax
* How an HMRC letter about £3,000 of income turned into a £275,000 tax bill