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 * |
6,475 |
6,475 |
| Income limit for age-related allowances |
22,900 |
22,900 |
|
Married couple's allowance – aged 75 or more |
6,965 |
6,965 |
| 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 |
| Capital Gains Tax |
2009-10 |
2010-11 |
| Annual exempt amounts: |
|
|
| 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 |