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News - 25 March 2010

Budget Highlights 2010

Alistair Darling presented his third Budget on Wednesday 24 March 2010.

Having acknowledged that the country is emerging from a deep global recession and needing to provide a route to long term prosperity he announced a number of new measures. Some will take effect immediately, whilst others will be enacted by a Finance Bill as soon as possible in the next Parliament, so the timing of the changes needs to be carefully watched.

Our summary focuses on the main issues.

Main Budget proposals

•    The Entrepreneurs' Relief limit will be doubled to £2 million for disposals on or after 6 April 2010. Gains qualifying for the relief are charged at an effective capital gains tax rate of 10%.

•    Most businesses are able to claim an Annual Investment Allowance on the first £50,000 spent on plant and machinery. This provides immediate 100% tax relief on qualifying expenditure. The allowance is to increase to £100,000 from April 2010.

•    Close companies, broadly family and owner managed companies, will no longer be able to obtain corporation tax relief on the write off of loans to a participator (generally a shareholder).

•    Inheritance tax nil rate band is currently £325,000 and this band will be frozen until 2014/15.

•    SDLT relief is introduced for first time home buyers but will be paid for by increasing SDLT to 5% on homes above £1 million.

•    Personal allowances (The proportion of income on which tax is not charged) will remain at their existing amounts.

•    No change to the Business Support Service, so tax deferment should still be available over the next year, with perhaps some stricter enforcement and stiffer questioning at the outset.

•    A duty of 50p per month will be imposed on telephone landlines with effect from 1 October 2010.

•    The next increase in fuel duty will be implemented in three stages: 1 pence per litre on 1 April 2010, 1 pence per litre on 1 October 2010, and 0.76 pence per litre on 1 January 2011.

Previous announcementsSome of the changes detailed in this summary have been the subject of earlier announcements. Here is a reminder of some of the more important ones:

•    The small companies rate is currently 21% and an increase to 22% is planned to take effect from 1 April 2011

•    Introduction of a 50% top rate of tax for those with income over £150,000 and the phased reduction of personal allowances for those with income over £100,000

•    As announced in December's Pre-Budget report, tax relief on pension contributions will be restricted to the basic rate for those with income of over £180,000; those in the band £150,000 to £180,000 will see their tax relief reduced proportionately until they reach the £180,000 limit.

There was definitely a sense of "it could have been worse" when Alistair Darling sat down - NICs and small company CT are still going up by 1% next year, but at the moment there's nothing worse on the horizon. The Vat Rate was left at 17.5%; the extended loss carry back provisions will be extended for another year, both for income tax and Corporation Tax.


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