Income tax
The personal allowance for those aged under 65 will be increased to £7,475 in 2011/12, from £6,475 in the current year. Those aged over 65 already have an annual exemption of £9,490 and those over 75 £9,640. This will be matched by a reduction in the basic rate threshold (currently £37,400) to ensure that higher rate taxpayers do not benefit from the increase.
Those earning over £100,000 already have their personal allowance progressively reduced by £1 for every extra £2 earned and those earning above £112,950 (or £114,950 in 2011/12) lose it entirely.
National Insurance contributions
Both the 1% rise for employees and employers will be introduced as planned.
The Government will shortly announce details of a scheme to help new businesses in targeted areas of the UK. During a three year qualifying period, new businesses which start up in these areas will get a substantial reduction in their employer National Insurance Contributions (NICs). Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in the first twelve months of employment.
Subject to meeting the necessary legal requirements, the scheme is intended to start no later than September 2010. Any new business set up from 22 June which meets the criteria set out in the forthcoming announcement will benefit from the scheme.
The countries and regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.