POST ELECTION RETRENCHMENT
BUDGET JUNE 2010
In his first Budget on Tuesday 22 June 2010, George Osborne stated that a “tough but fair” Budget was needed.
Set out below are some of the key changes that are likely to affect you:
Income Tax
If you are aged under 65 the personal allowance will be increased by £1,000, from £6,475 to £7,475 for 2011/12. However, higher rate taxpayers will continue to have the personal allowance withdrawn by £1 for every £2, where their income exceeds £100,000.
The higher rate limit will remain fixed until 2013/14, at £37,400.
The 50% tax rate will remain in force if you have income of £150,000 or over.
Tax relief for pension contributions is still available but pension premium relief is to be reviewed with a view to simplifying the current system.
Capital Gains Tax (CGT)
Basic rate tax payers will continue to pay CGT at 18%.
From 23 June 2010 higher rate taxpayers will pay CGT at 28% and this higher rate will also apply to Trusts and the estates of deceased individuals.
The Annual Exempt Amount (AEA) remains unchanged at £10,100 for 2010/11.
If you are liable to tax at the new 28% rate, HMRC have yet to clarify how your AEA and losses will be used in the split year. The indications so far are that, where you have gains both before and after budget day, available losses and AEA can be set against gains liable at 28% first, before offsetting any balance against gains made before budget day, liable at 18%.
Entrepreneurs’ relief was increased so that CGT is at an effective rate of 10% on the first £5 million (previously £2 million) of qualifying lifetime gains.
Corporation Tax (CT)
The main rate of CT, for companies with profits over £1.5 million, will be reduced by 1% in each of the next 4 years, bringing the rate down to 24% in 2015/16.
The small companies’ rate, on profits up to £300,000 will be cut from 21% to 20% from 2011/12.
National Insurance Contributions (NIC)
From April 2011 the upper earnings limit will be increased to align with the income tax higher rate limit. This is on top of the increase of 1% already announced, in the employees rates.
Relief from employers NICs of up to £5,000 are to be introduced for new businesses hiring employees in the first year and this scheme will apply in targeted regions of England.
Capital Allowances
The rates of write off on plant and machinery are to be amended to spread the reliefs over a longer period with the changes applying from April 2012.
Value Added Tax (VAT)
The main rate of VAT is to be increased from 17.5% to 20% from 4 January 2011 and from the same date changes are to be made to percentages applying to flat rate schemes. The reduced rate will remain at 5%.
Banking Levy
The charge, based on banks’ balance sheets is to be introduced from 1 January 2011 and this will be at 0.07%, with a lower initial rate of 0.054% in 2011.
If you have any questions, please get in touch with John Salton Tel: 020 7674 0581 johnsalton@cumberlandellis.com
