Looking ahead to 2012

Income tax and personal allowances

The personal allowance for those aged under 65 increases to £8,105 from 6 April 2012. However, the advantage to higher rate taxpayers will be countered by a lowering of the higher rate threshold, to £34,370.

Capital allowances

The current system of capital allowances will see significant changes from April 2012, including a reduction in the amount of expenditure on plant and machinery which qualifies for a 100% year one write-off (via the annual investment allowance) from £100,000 to just £25,000.

In addition, for chargeable periods ending on or after 1 April 2012 (for businesses within the charge to corporation tax) and on or after 6 April 2012 (for businesses within the charge to income tax), the rates of writing down allowances will be reduced to 18% (main rate pool) and 8% (special rate pool).

Pensions tax relief lifetime limit

The lifetime allowance on money that can be accrued in a pension fund and still receive tax relief, is set to fall from £1.8m to £1.5m from April 2012.

Research & Development

The additional corporation tax deduction given to small and medium-sized enterprises for qualifying R&D expenditure will rise from 100% to 125%. It will have effect for expenditure incurred on or after 1 April 2012.

Inheritance tax

A reduced inheritance tax rate of 36% will apply from 6 April 2012 to death estates, where 10% or more of the net estate is left to charity.