Budget Report 2010 main points in summary:

Income Tax

• basic rate will remain at 20%
• higher rate will remain at 40%
• additional rate will be set at 50%

 

The basic rate limit will remain at £37,400 and the starting rate limit for savings will remain at £2,440. The personal allowances will remain at their 2009-10 amounts.

From 2010/11 the amount of the personal allowance will be gradually withdrawn for all individuals (regardless of age) with "adjusted net incomes" above £100,000. The rate of reduction is £1 for every £2 above the income limit.

National Insurance

All NICs rates and thresholds are unchanged, except for two areas which are:

• the Lower Earnings Limit (LEL) which is linked to the basic State Pension will increase by £2 from £95 per week to £97 per week; and
• the special Class 2 rate for Volunteer Development Workers will increase by 10p from £4.75 per week to £4.85 per week, because this is linked to the LEL.

 

For 2011/12, in addition to the 0.5% increases already announced at PBR 2008:

• the main rates of Class 1 and Class 4 NICs will be increased by a further 0.5 per cent to 12 per cent and 9 per cent respectively;
• the employer rate for both Class 1A and 1B contributions will be increased by a further 0.5 per cent to 13.8 per cent;
• the additional rate of Class 1 and 4 NICs will be increased by a further 0.5 per cent to 2 per cent; and
• the primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners.

 

Inheritance Tax

The Inheritance Tax (IHT) nil rate band will be frozen at its current level of £325,000 up to and including tax year 2014/15.

Capital Gains Tax

No change in the Capital Gains Tax rate of 18%.

Entrepreneurs relief increasing to £2 million from 6 April 2010.

Annual exemption of £10,100 remains the same.

Pensions

The 2010/11 Lifetime Allowance of £1.8 million and Annual Allowance of £255,000 will continue to apply at these levels for a further five tax years.

As announced at Budget 2009 there will be restricted tax relief on pensions savings with effect from 6 April 2011 for people with income of £150,000 or over but below £180,000 (although individuals with pre-tax income of between £130,000 to £150,000 may be caught by the legislation). The tax relief on pension contributions (including the value of employer contributions for those in employment) will reduce gradually from marginal rate to basic rate as income increases. Where income is £180,000 or over, tax relief on pension contributions will be restricted to basic rate. For the anti forestalling rules please refer to our previous news article 'Maximising tax relief on pension contributions – Special Annual Allowance'.

Stamp Duty Land Tax (SDLT)

On or after 25 March 2010 and before 25 March 2012 first time buyers will not pay any Stamp Duty Land Tax (SDLT) for property purchased up to £250,000.

A new SDLT rate of 5% will apply to residential property purchases for over £1 million on or after 6 April 2011.

Savers

As announced at Budget 2009, from 6 April 2010 the annual ISA investment limit for every adult is £10,200, up to £5,100 of which can be saved in cash.

VAT

The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010.

The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.

Corporation Tax

For the Financial Year commencing 1 April 2010 the small profits rate of Corporation Tax remains at 21%.

The marginal relief fraction remains at 7/400ths for all profits.

For the Financial Year commencing 1 April 2010 the main rate of Corporation Tax remains at 28%.

Annual Investment Allowance (AIA)

The AIA from 1 April 2010 (for Corporation Tax) or 6 April 2010 (for Income Tax) will double to £100,000.

Please contact us at Edwin Smith if you would like to discuss the Budget Report 2010 in more detail.

This blog news page is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.