Budget Comment April 2009
Resign!
Sorry but it’s time for a rant. You can blame the economists, but they have always been finger in the air merchants who are only guessing. You can blame fat cat bankers, but they couldn’t even see the smoke and mirrors for the piles of cash. You can blame the regulators, but they are nice professional people cast adrift in punctured rubber dinghies in a bandit ridden shipping channel. You can blame all of us for being part of the system. In fact you can blame who you like.
I blame the smug certainty of our former ‘no more boom & bust’ Chancellor. And now after many annoying Budgets he and his Darling sidekick have just released the most irritating Budget in memory. Here are a few of the highlights:
The 50% tax rate (51% when you add in National Insurance)
From 6 April 2010 the top rate of Income Tax rises to 50% for those with taxable income above £150,000. We also think, from a previous announcement, that the National Insurance will rise by 0.5% for employees and employers from 5 April 2011.
Comment: The Government has presided over the booming tax planning circus, the offshore barons, the tax attorneys and the (largely) inappropriate tax avoidance vehicles. In one fell swoop they have given a real boost to that industry. That’s not all, it will alienate those the country needs most, it won’t generate much tax revenue and if it is a good idea now why didn’t he do it 10 years ago. Resign!
The scrapping of the Personal Allowance
From 6 April 2010 the Personal Allowance is gradually removed for those with taxable income above £100,000.
Comment: Pitifully low tax Revenue from this one but more alienation and more for the planners to juggle with. Remember that these planners are a good deal more resourceful and motivated than the Treasury boffins – they will find something. Resign!
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.
Comment: Fiendishly complicated here but he forced himself into this with the 50% tax rate. In fact there will be complexity in areas where the Chancellor doesn’t even realise there are areas. On top of this – more alienation. Resign!
Announcements today not in force until April 2011
The signalling of future changes has been a feature of recent Budgets – justifying today’s spending decisions on tomorrow’s tax rises. More smugness, more spending, more deficit, more complexity, more deceit, more politics. You guessed it – resign!
Phew that feels better (and in case you are wondering, no, I don’t earn over £150,000).
There were no major changes to:
- Capital Gains Tax
- Inheritance Tax
- Spousal remuneration for owner managed companies (good!)
Rates and Allowances for 2016 and 2017
The chart of new Rates and Allowances is, as always, set out below. Probably the biggest change is the increase in Tax Free income (the Personal Allowance) from £9,440 to £10,000 in 2014-15. Did you think it was £10,500? Understandable if you did but that is next year’s Allowance (2015-16). The good thing for higher rate taxpayers is that the 40% threshold hasn’t been reduced (as it has been recently) in fact it has increased from £41,450 to £41,865. So a real benefit here for higher rate taxpayers. There’s a summary of Tax Rates below reflecting these changes.
| Taxable bands 2008-09 (£) |
Taxable bands 2009-10 (£) |
||
| Starting rate 10% |
– |
Starting rate 10% |
– |
| Basic rate 20% |
0 – 34,800 |
Basic rate 20% |
0 – 37,400 |
| Higher rate 40% |
Over 34,800 |
Higher rate 40% |
Over 37,400 |
| Corporation tax profits 2009-10 (£) |
|
| Small companies' rate 21% |
0 – 300,000 |
| Marginal relief |
300,001 – 1,500,000 |
| Main rate 28% |
1,500,001 or more |
National Insurance changes from 6 April 2009
|
|
2008/2009 |
2009/2010 |
||
| Class 1 Employees |
||||
| On first |
£105 pw |
Nil |
£110 pw |
Nil |
| Between |
£105 - £770 pw |
11% |
£110 - £844 pw |
11% |
| Over |
£770 pw |
1% |
£844 pw |
1% |
| Employee's contracted-out rate | 1.6% | 1.6% | ||
| Married
womans reduced rate |
4.85% of £105 to £770 pw, 1% above £770 | 4.85% of £110 to £844 pw, 1% above £844 | ||
| Class 1 Employers |
||||
| On first |
£105 pw |
Nil |
£110 pw |
Nil |
| Over |
£105 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 | £2.30 pw | £2.40 pw | ||
| Small earnings exception | 4,825 pa | 5,075 pa | ||
| Special Class 2 rate for share fisherman | £2.95 pw | £3.05 pw | ||
| Special Class 2 rate for volunteer development workers | £4.50 pw | £4.75 pw | ||
| Class 3 Voluntary |
||||
| Flat rate |
|
£8.10 pw |
|
£12.05 pw |
| Class 4 Self employed |
||||
| On profits between |
£5,435 - £40,040 pa |
8% |
£5,715 - £43,875 pa |
8% |
|
|
above £40,040 | 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 |