Overview

The UK Finance (No. 3) Bill is a comprehensive piece of legislation that adjusts various tax rates, allowances, and duties, introduces a bank levy, and includes anti-avoidance measures. It aims to generate revenue and amend existing financial laws.

Description

This bill significantly alters several tax rates and allowances for the tax year 2011-12 and beyond. Key changes include:

• Income Tax: The basic rate remains at 20%, higher rate at 40%, and additional rate at 50%. The basic rate limit is set at £35,000, and the personal allowance for those under 65 is £7,475.
• Corporation Tax: The main rate is lowered to 26% for 2011 and 25% for 2012 (excluding ring-fence profits, which are taxed at 30% in 2012 and a higher supplementary charge). A supplementary charge on ring-fence profits is increased to 32% from March 2011.
• Capital Gains Tax: The annual exempt amount is set at £10,600 for 2011-12, with future adjustments linked to RPI. Entrepreneurs' relief is increased to £10 million.
• Capital Allowances: Writing-down allowances for plant and machinery are reduced. The annual investment allowance is reduced to £25,000 from April 2012. Rules for short-life assets are modified.
• Other Taxes: Various duties are altered, including alcohol, tobacco, fuel, vehicle excise, climate change levy, aggregates levy, and landfill tax. Specific changes for each are detailed in the bill itself.
• Anti-Avoidance: The bill introduces numerous anti-avoidance provisions, including measures targeting employment income through third parties, tainted charity donations, and group mismatch schemes.
• Bank Levy: A new bank levy is introduced, applying to the equity and liabilities of UK and certain foreign banks and related entities.

Government Spending

The bill's impact on government spending is complex and depends on the success of revenue-raising measures. No specific figures are provided in the bill text itself, but the changes suggest an intent to increase government revenue through higher tax rates and duties and through the introduction of a new bank levy.

Groups Affected

• Individuals: Higher earners will see a reduction in childcare relief. Taxpayers will face changes in income tax allowances and rates, and increased duties on various goods and services.
• Businesses: Businesses will be affected by the changes to corporation tax, capital allowances, and various duties. Anti-avoidance measures could impact tax planning strategies. Banks will face the new bank levy.
• Charities: New rules are in place regarding tainted charity donations which could affect tax relief on charitable donations
• MPs: The bill clarifies tax rules on MPs' accommodation expenses.

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