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Budget Comment April 2010
We are all on hold

After last year’s spectacular raid on the higher earners, this year there is nothing more than a ‘steady as she goes’ pre-election Budget, but we all know that the public finances are not ‘steady as she goes’ so we can expect a radical Budget within a year of the new Government – whatever the outcome.

  • Income Tax
  • Capital Gains Tax (other than the doubling of Entrepreneurs Relief from £1,000,000, to £2,000,000)
  • Inheritance Tax (other than announcing that the tax free allowance (currently £325,000 per person) is frozen until after 5 April 2015
  • Corporation Tax
  • VAT
  • Spousal remuneration for owner managed companies (good!)
But there are three things to mention
Women (and men)

This was announced several years ago but, from now on, women turning 60 are in transition for State Pension. In five years time women will receive State Pension at the age of 65 – between now and then, for every month you were born after 5 April 1950, your State Pension is put back by a month. And in subsequent years the pension age, for men and women, will gradually be put back to (at this stage) age 68. If you are interested, try the State Pension Profiler at: www.direct.gov.uk.

Business tax

The Annual Investment Allowance (which allows businesses to deduct the full amount of capital expenditure (other than on buildings and cars)) was doubled from £50,000 to £100,000. This is part of the ‘Capital Allowance’ regime.

Stamp Duty

There was the introduction of a new 5% rate of Stamp Duty on houses purchased for over £1,000,000 from 5 April 2011.
There is also a two year period for first time buyers to purchase their main residence where the price is below £250,000 without paying Stamp Duty. The two years began on 25 March 2010.

There are also the changes announced last year – remember these?

The 50% tax rate

From 6 April 2010 the top rate of Income Tax rises to 50% for those with taxable income above £150,000.

The scrapping of the Personal Allowance

From 6 April 2010 the Personal Allowance is gradually removed for those with taxable income above £100,000.

Increase in National Insurance

National Insurance will rise by 0.5% for employees, the self-employed and employers from 5 April 2011. This is the measure that is currently causing political unrest.

The removal of higher rate tax relief on pension contributions

From 6 April 2011 certain pension contributions will no longer attract higher rate tax relief for those with taxable income above £150,000 (now reduced to £130,000 and restrictions are already in place).

Rates and Allowances for 2010 and 2011

Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax are set out below.

Income Tax

2009-10

2010-11

Allowances

£

£

Personal allowance *
Personal allowance for people aged 65 - 74
Personal allowance for people aged 75 or more

6,475
9,490
9,640

6,475
9,490
9,640

Income limit for age-related allowances

22,900

22,900

Married couple’s allowance – aged 75 or more
Minimum amount of married couple’s allowance
Blind person's allowance

6,965
2,670
1,890

6,965
2,670
1,890

Taxable Bands    
Starting rate for savings 10%
Basic rate 20%
Higher rate 40%
Additional rate 50%
0 – 2,440
0 – 37,400
> 37,400
N/A
0 – 2,440
0 – 37,400
37,401–150,000
> 150,000
* From April 2010 the Personal Allowance will be gradually withdrawn for income over £100,000 at a rate of £1 of allowance lost for every £2 over £100,000 until it is completely removed.

Capital Gains Tax

2009-10

2010-11

Annual exempt amounts:
Individuals etc.
Other trustees


£10,100
£5,050


£10,100
£5,050

Standard rate
18%
18%

Inheritance Tax

2009-10

2010-11

Threshold

£325,000

£325,000

Rate
40%
40%

Corporation Tax

Profits 2009-10 & 2010-11

Small companies' rate 21%

£0 – £300,000

Marginal relief

£300,001 – £1,500,000

Main rate 28%

£1,500,001 or more

Capital Allowances

2009-10

2010-11

Annual Investment Allowance

£50,000

£100,000

Writing Down Allowance
20%
20%

Value Added Tax (VAT)

2009-10

2010-11

Registration threshold

£68,000

£70,000

De-registration threshold
£66,000
£68,000
National Insurance

National Insurance

2009-10

2010-11

Class 1 Employees

On first

£110 pw

Nil

£110 pw

Nil

Between

£110 - £844 pw

11%

£110 - £844 pw

11%

Over

£844 pw

1%

£844 pw

1%

Employee's contracted-out rate 1.6%   1.6%
Married womans
reduced rate
4.85% of £110 to £844 pw, 1% above £844 4.85% of £110 to £844 pw, 1% above £844

Class 1 Employers

On first

£110 pw

Nil

£110 pw

Nil

Over

£110 pw

12.8%

£110 pw

12.8%

Employers' contracted-out rebate, salary related schemes 3.7%   3.7%
Employers' contracted-out rebate, money purchase schemes 1.4%   1.4%

Class 2 Self employed

Flat rate £2.40 pw   £2.40 pw
Small earnings exception £5,075 pa   £5,075 pa
Special Class 2 rate for volunteer development workers £4.75 pw   £4.85 pw

Class 3 Voluntary

 Flat rate

£12.05 pw

£12.05 pw

 Class 4 Self employed

On profits between

£5,715 - £43,875 pa

8%

£5,715 - £43,875 pa

8%

 

above £43,875

1%

above £43,875

1%

Stamp Taxes

Transfers of property (consideration paid)

Rate
All land in the UK
Land in disadvantaged areas
  Residential Non-residential Residential Non-residential
Zero £0 - £125,000 £0 - £150,000 £0 - £150,000 All
1% Over £125,000 – £250,000 Over £150,000 – £250,000 Over £150,000 – £250,000  N/A
3% Over £250,000 – £500,000 Over £250,000 – £500,000 Over £250,000 – £500,000  N/A
4% Over £500,000 Over £500,000 Over £500,000  N/A
New leases (lease duty)

Duty on the premium is the same as for transfers of land (except that special rules apply for non-residential land and property premium where rent exceeds £1,000 annually. The rules no longer apply to residential property from 12 March 2008). Duty on the rent is charged on any part of the net present value (NPV) which exceeds the threshold.

Rate
Net Present Value of Rent Rate
  Residential Non-residential
 
Slice of NPV
Zero £0 - £125,000 £0 - £150,000
1% Over £125,000 Over £150,000
Value Added Tax (VAT)
  April 2011-12 April 2012-13
Standard rate 20% 20%
Reduced rate 5% 5%
Zero rate 0% 0%
Exempt n/a n/a
Value Added Tax (VAT) – Registration and Deregistration thresholds
  From April 2011 From April 2012
VAT - registration threshold 73,000 77,000
VAT - deregistration threshold 71,000 75,000

The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5% for 2009-10.