How the 2011 Budget will affect your pharmacy

"The 2011 Budget was perceived as a slightly positive budget by the businesses," says pharmacy accountant Umesh Modi. "There was emphasis on jobs and growth, reduction in corporation tax rates, increased personal allowances, and increased tax breaks. "However, when you take into account increased inflation, national insurance contributions, VAT and other duties, and reduced benefits and restrictions on allowances below the rate of inflation, this was broadly a neutral budget. So has the chancellor put the fuel in the tank?" Personal tax allowance increases As previously announced, the personal tax allowance has been increased by £1,000 to £7,475 from this month and further £630 to £8,105 from April 2012. This means that a couple with two children, with one person working and earning £50,000 gross, will lose out by about £750. A couple with two children, where both are working and earning £50,000 gross, will be £170 worse off. A single person or couple with two children earning £25,000 will be better off by between £400 and £800. "Locums operating through their companies could benefit by £200 to £400," says Mr Modi, a partner at accountacy firm Silver Levene. National insurance contribution increases National insurance contributions (NICs) are increasing by 1 per cent for employees and employers to 12 per cent and 13.8 per cent respectively. The additional rate for employees earning over £817 per week also increases from 1 per cent to 2 per cent. "For a small company with a wages bill of £50,000, the cost will increase by £500," says Mr Modi. In the longer term, the government is to look into merging income tax and national insurance. Tax director Jeff Webber comments: "This would simplify matters for employers, but a great deal of thought will be needed to deal with the effect of such a change on pensioners and the effect on investment income." Capital gains tax allowance and entrepreneurs' relief increases The annual capital gains tax allowances have increased from £10,100 to £10,600. And, adds BDO's Mr Webber: "In a surprise but very welcome move, the chancellor doubled the entrepreneurs' relief lifetime allowance, under which qualifying disposals of businesses or business assets are subject to capital gains tax at only 10 per cent, from £5 million to £10m. The new limit will apply to qualifying disposals from April 6, 2011." Car mileage allowance increases The maximum tax-free mileage allowance payable to employees who use their own cars or vans for business has been increased from 40p per mile to 45p per mile on the first 10,000 miles and from 20p to 25p on the rest. "The government has recognised the rising cost of fuel for employees," says Mr Webber. Simplification of pension contributions The pension contribution rules have been simplified from this month, and the maximum allowable contributions will be £50,000 per annum. A husband and wife company can therefore put £100,000 into pensions with the benefit of the corporation tax relief. Corporation tax reductions Mr Modi is pleased that the main rate of corporation tax has gone down from 28 per cent to 26 per cent from this month and will continue to go down by 1 per cent in each of the following financial years, to 23 per cent by April 2014. But he adds: "Though welcomed, it was disappointing to note that the small company rate will go down by 1 per cent to 20 per cent from this month and no further reductions were announced for large companies. That said, a small company with profits of £150,000 will benefit by £1,500 per annum." Business regulations relief There will be a three-year moratorium on regulations for small businesses. Says Mr Modi: "This has got to be a good thing, as red tape is drowning small businesses in paperwork and increased costs." Tax avoidance clampdown HMRC will get more resources and there is going to be continued effort to crack down on tax avoidance schemes. Enterprise boosts Twenty-one enterprise zones are to be created. The first 10 will be in Birmingham and Solihull, Leeds, Liverpool, Greater Manchester, the Tees Valley, Tyneside, the Bristol area, the Black Country, Derbyshire and Nottinghamshire, and Sheffield. There will also be a zone in London, and 10 further zones will be announced in the summer. This means that businesses situated in these zones will be entitled to enhanced capital allowances and other benefits, including discounted business rates and superfast broadband. More generally, enterprise investments schemes will get a boost, as tax relief increases from 20 per cent to 30 per cent on investment of up to £1m from this month. Tips for your CPD entry on finance Reflect How will the Budget affect my pharmacy? Plan Review the new tax and benefit changes in the Budget. Act Factor the changes into my pharmacy business plan. Evaluate Is my pharmacy able to cope with the changes in the Budget?

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