Many freelancers will have heard of the £100.00 penalty for late filing of their tax return; however this penalty has always been capped so if you filed your return late but had a tax liability of only £50.00 then your penalty could only be £50.00. HMRC are removing this cap so all late returns will receive an automatic £100.00 penalty.

They have also stated that for prolonged late returns the fines will increase in the following way:

A daily penalty of £10.00 for returns which are over three months late – this can run for a maximum of 90 days.

An additional £300.00 – or five per cent of the tax due if this is higher – for returns over six months late.

A further £300.00 – or a further five per cent of the tax due if this is higher – for returns over twelve months late.

A higher penalty of 70% will be charged if a return has not been submitted for more than twelve months and information has been deliberately withheld which HMRC requires to properly assess the tax owed.

This penalty increases to 100 per cent of your tax liability if HMRC deems that information has been deliberately concealed from them.

The Self-Assessment deadlines are 31 October 2011 for all paper returns and the 31 January 2012 for all online returns.

However do not leave it till the last minute to send your income information through to us - we can file your return today and you still won't have to pay your tax liability until 31 January 2012 - no reason to put it off.

End.

Corporation Tax

The small profits rate paid by contractor companies has been cut from 21% to 20% from 1st April 2011.

Value Added Tax

The standard rate of VAT remains at 20%.

The VAT registration threshold from 1st April 2011 is £73,000.

The de-registration threshold is £71,000.

Dividend Tax

The tax rates on dividends remains unchanged for the 2011/12 tax year:

Income Tax

The Personal Allowance rises by £1,000 to £7,475.

For incomes of £100,000, the value of the personal allowance is removed by £1 for evert £2 over the threshold.

Income Tax - Taxable Bands

The basic 20% rate of income tax applies between £7,475 and £42,475

The higher 40% rate applies between £42,476 and £150,000.

The additional 50% rate applies on income above £150,000.

National Insurance (NICs)

The employers' NIC rate rises from 12.8% to 13.8% from 6th April 2011. The employee's NIC rate rises from 11% to 12%.

Approved Mileage Allowance Payments (AMAPs)

The standard car rate will rise from 40p to 45p from April 6th 2011 for the first 10,000 miles, and 25p thereafter.

Pensions Savings - Tax Relief

The lifetime allowance is £1.8m (this will be cut to £1.5m in 2012/13).

The annual allowance has been cut from £255,000 to £50,000.

Capital Gains Tax

The standard CGT rate for individuals remains at 18% (basic rate), and 28% (higher rate).

The lifetime allowance for Entrepreneurs' Relief has been doubled from £5m to £10m.

Inheritance Tax

The IHT threshold remains at £325,000. The IHT above this threshold is 40%.

From April 2012, a reduced rate of IHT of 36% will be introduced where 10% or more of the net estate is left to charity

ISAs

The ISA limit is increased to £10,680 (from £10,200), £5,340 of which can be saved in cash.

End.

So it's a coalition government - should make for some interesting politics - all seems lovely and rosy at the moment, but what does it mean for the UK tax payer? We found out a little, late last week:

The good:

1. Raising the tax free allowance from £6,475 to £10,000.

2. Corporation tax rates will fall over the next 5 years.

3. No Employers National Insurance to pay for the first 10 employees for start up businesses in their first year.

The bad:

1. Potential increase in capital gains tax from 18% to 40% to pay for the increase in tax free allowance.

Raising the tax free allowance will help anyone earning less than £150,000, low earners will see the biggest difference in their take home pay.

Decreasing corporation tax will help businesses re-invest more of their profits or owners to extract more.

Employers National Insurance - not too many people starting a new business employ 10 people, or for that matter any people in their first year of trading. It would have been a real show of new business start up support if the government had extended this to the first three years of trading. We'll have to wait and see.

Regarding the bad news - if you own property as an investment that you rent out, aiming to make profit in way of increased value - your profit might have just taken a 22% hit with the CGT rate potentially rising form 18% to 40%.

Whilst we are still awaiting the small details of this change - you may want to get in touch to find out if you are holding your property in the most tax efficient manner. Please feel free to contact us with any questions.

As always it's a very busy time at 123 Contracting. We've been working on and developing our back room systems over the last two weeks. This has resulted in even greater efficiency throughout what we do - we're really happy with how it's gone and it should ensure we continue to provide the highest levels of personal service as we continue to expand and grow.

There will be lots more developments in the coming weeks that we look forward to telling you about, we're quite excited about some of our plans!