Budget 2010: Individuals

Tuesday 22 June 2010

Main announcements for individual taxpayers, tax credits and child benefit claimants:

All announcements for individual taxpayers, tax credits and child benefit claimants.

Capital Gains Tax - Rates and Entrepreneurs' Relief

From 23 June 2010 there will be two main rates of capital gains tax (CGT), 18 per cent and 28 per cent, in place of the single rate of 18 per cent for all gains. The rate paid by individuals will depend upon the amount of their total taxable income. Gains qualifying for entrepreneurs' relief will be taxed at a rate of 10 per cent, and the lifetime limit of gains qualifying for entrepreneurs' relief will be raised to £5 million (from the previous figure of £2 million). Gains of trustees or personal representatives of deceased persons will be charged at 28 per cent.

Further information:

Capital Gains Tax - Rates and Entrepreneurs' Relief - Questions and answers

Budget Note 20


Changes to the personal allowance, basic rate limit and upper earnings limit for NIC

Legislation will be introduced to provide for the following income tax and National Insurance Contributions (NICs) changes for the tax year 2011-12:

  • the personal allowance for those aged under 65 will be increased by £1,000 to £7,475;
  • the basic rate limit will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance. The exact figure will be confirmed when September's Retail Prices Index (RPI) is known;
  • the alignment of the Upper Earnings/Profits Limit (UEL/UPL) with the higher rate threshold (the total of the personal allowance for those aged under 65 and the basic rate limit) will be maintained by reducing the UEL/UPL; and
  • the secondary threshold, which is the point at which employers start to pay Class 1 NICs, is to be increased by an extra £21 per week above indexation.

Taken together, these measures reduce the tax liability for those on lower incomes and have no impact on most higher rate taxpayers who are employees or self employed and will help employers.

Further information:

Budget Note 1


Main Changes to Tax Credits and Child Benefit

  • The Government will reduce tax credit eligibility for families with household income above £40,000 from April 2011 and make further changes in 2012-13;
  • The Government will increase both withdrawal rates to 41%;
  • The Government has announced the removal of a number of elements from the Tax Credits system including the baby element (6 April 2011) and the age 50+ element (6 April 2012);
  • The Government will use the Consumer Price Index (CPI) to uprate all of those elements of tax credits due to be uprated by RPI from April 2011. The child element of the Child Tax Credit will increase by £150 above CPI in 2011-12 and 60 above CPI in 2012-13. The rate of Child Benefit will remain at current levels until April 2014, which will help fund increases in the child element of the Child Tax Credit;
  • The backdating provisions have been shortened to one month with effect from 6 April 2012 from the current 93 days and amendments will also be made to the income disregard for income increases from 6 April 2011 and an introduction of a disregard for income falls from 6 April 2012; and
  • Whilst the Government has chosen to continue with the previously announced decision on Working Tax Credits of the over 60s, they have reversed the March 2010 announcement to increase for those with children aged one or two.

Health in Pregnancy Grant - Ending of entitlement

The Health in Pregnancy Grant is a £190 one-off payment to all expectant mothers that is made irrespective of income. The Government considers the universal Grant to be a poor use of limited public funds and it will be abolished to help reduce the deficit in a fair way.

The Government proposes to abolish Health in Pregnancy Grant from 1 January 2011. Women who reach the 25th week of pregnancy before 1 January 2011 will still be entitled to the grant providing they satisfy the conditions of the grant.


Taxation of non-domiciled individuals

The Chancellor has announced that the Government will review the taxation of non-domiciled individuals. This reiterates a statement made previously in the Coalition Agreement.