• At-a-glance
• Administration Of Tax
• Personal Taxation
• Employment Taxation
• Business Tax
• Corporation Tax
• Capital Gains Tax
• Savings and Investments
  
• Trusts
  
• Anti-Avoidance
  
• Stamp Taxes
• Value Added Tax
• Insurance Premium Tax
• Environmental Taxes
• Excise Duties
• Miscellaneous

Personal Taxation

Personal Allowance, Basic Rate Limit and NICs Thresholds for 2011/12

From 6 April 2011 the personal allowance for those aged under 65 will be increased by £1,000 to £7,475. In order that higher rate taxpayers do not benefit from this increase the basic rate limit will be reduced by a figure to be confirmed when September’s Retail Prices Index is known.

The upper earnings limit and upper profits limit for National Insurance contributions will be reduced accordingly.

The secondary threshold, the starting point for payment of employers Class 1 National Insurance contributions will be increased by £21 per week above indexation. This is in addition to the planned increase in the primary threshold and the 1% increase in rates already planned for 2011/12.

Changes to the Rules on Deduction of Income Tax at Source

HMRC will have the power to amend the rules relating to how and when individuals and non-corporates need to report and remit income tax that they are required to deduct from certain payments, e.g. interest, patent royalties and other annual payments. This measure will not apply to companies making such payments.

The current regime is set out in primary legislation (ITA 2007, s 963), but with effect from the date of Royal Assent to the autumn Finance Bill, HMRC will be able to make regulations to change these rules.

Special Guardianship Orders and Residence Orders

A new income tax exemption for qualifying guardians is to be introduced with backdated effect from 6 April 2010 for payments received on or after that date. The legislation will be included in a Finance Bill to be introduced as soon as possible after the summer recess.

The exemption will apply to ‘qualifying payments’ made to ‘qualifying guardians’. ‘Qualifying guardians’ are individuals who care for one or more children placed with them under a special guardianship order or under a residence order (where the individual is not the child’s parent or step-parent). ‘Qualifying payments’ are payments made to the carer by the child’s parents or by (or on behalf of) a local authority, in relation to a special guardianship order or a residence order.

Kinship carers who are providing care to a child who has not been placed with them under a residence order will not be qualifying guardians for the purposes of the above exemption. However, they will be entitled to claim the new income tax relief for Shared Lives carers. Broadly they can choose to pay tax only on the excess of their care income above a certain limit or on their actual profits computed under the normal income tax rules for businesses.

Income Tax Relief for Shared Lives Carers

Existing non-statutory guidance is to be superseded by new legislation with backdated effect from 6 April 2010. The legislation will be included in a Finance Bill to be introduced as soon as possible after the summer recess. There will be a single relief (to be known as ‘qualifying care relief’) for qualifying Shared Lives carers, and this will be based on a tax-free allowance. Carers whose Shared Lives earnings do not exceed the tax-free allowance will not be taxed on their income from providing Shared Lives care. Carers whose Shared Lives earnings are more than the tax-free allowance have the option to choose to be taxed on:

• their total receipts from providing care less the tax-free allowance; or
  
• their actual profits computed using the normal tax rules for businesses.
  This will operate in a similar way to existing relief for foster care. The tax-free allowance will be available per household and consist of:
  
• a £10,000 fixed amount per tax year;
  
• £200 per week (or part week) per placement aged under 11; and
  
• £250 per week (or part week) per placement aged 11 or over.

Where there is more than 1 carer in the household, the household may provide care to a maximum of 3 Shared Lives placements, and the allowance will be shared equally between the carers. If the carer is entitled to both foster care relief and the relief for Shared Lives carers, the household will only be entitled to claim 1 £10,000 fixed amount per tax year.

For the tax year 2010/11 only, Shared Lives carers can choose between the pre-existing non-statutory arrangements for adult placement carers and the new tax-free allowance. The non-statutory arrangements will then be withdrawn from 2011/12.