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Budget and tax information 2010

The 2010 Budget Explained

The budget and tax changes explained by Steve of Exeter Accountants showing how it affects you and your business.

The 24th March 2010 budget day, might pass into history as the non-budget. A looming general election overshadowed the Chancellor’s announcements, but it still contained some help for small businesses budgets plus some nasty personal tax increases.

Although the Chancellor claimed it is a neutral budget it will raise £23 billion in tax.

Extere accountants

Below is a quick reference summary of the prime aspects to the Budget. For details of how it the tax changes affect you and your business contact me on 01395 233178.

Business Briefing

Skills and innovation £2.5 billion package

  • The Chancellor announced a package of £2.5 billion for small businesses to assist in boosting skills and innovation.

  • This should provide help with staff training and enable small businesses to undertake operational efficiencies.

Corporation tax deferred

  • Corporation tax rates on profits remain unchanged.

  • The rise to 22% in the small companies’ tax rate will be deferred until 2011/12.

  • The Revenue & Customs ‘Time to pay tax Scheme’ is to become permanent.

Capital allowances doubled

  • The annual Investment Allowance on plant and machinery is increased from £50,000 to £100,000.

  • This doubling of the annual investment allowance still enables a 100% tax deduction against profits.

  • The write down rates remain unchanged.

  • Overall, if a major capital purchase is being considered, this might be the time to undertake it.

Company cars

Car benefit charges

  • No changes have been made to the method of calculating the car benefit charge tax.

  • Reduced percentages have been included for cars running on alternative fuels.

  • The method of calculating fuel charges remains unchanged.

Value added tax rates unchanged

  • The standard rate for VAT taxation remains at 17.5%.

  • The registration threshold is increased from £68,000 to £70,000 and the de-registration threshold from £66,000 to £68,000.

  • The cash accounting, annual and flat rate schemes turnover limits have all remained the same.

Business rates to be reduced

  • To assist smaller businesses, the business rate will be cut from October for one year. It is estimated this will assist some 500,000 businesses.

  • Chancellor announced that an increase of only 2% will become due from April 2010 with the balance falling due over the next 2 years.

  • The relief is not automatic and only kicks in during the summer.

  • It applies to businesses operating from premises with a rateable value up to £12,000

Bank lending to be made available

  • The Chancellor announced in the budget that RBS and Lloyds Bank Group had agreed to provide £94 billion in small business loans.

  • This is virtually the same as before except that it is being measured in gross terms rather than net.

  • Half the amount is to be for small businesses.

  • A credit adjudication service is to be introduced for disputes when small businesses are refused loans by banks.

  • A £2 billion “green investment” bank is being introduced to stimulate low carbon industries.

  • This might provide opportunities in the south west for many companies. Details have yet to be announced.

Training extended

  • The six month work or training guarantee for those under 24 is to be extended to 2012.

Furnished holiday lettings reversed

  • The furnished holiday lettings rules are to be withdrawn from 6 April 2010.

  • It means the tax treatment for furnished holiday lettings will be the same as for other property rental businesses.

Personal taxation briefing

Income tax rates changed – high earners beware

  • The main rates for income tax for 2010/11 will remain at 20% for basic rate taxpayers and 40% for higher rate taxpayers.

  • A new additional rate of tax of 50% will apply on incomes over £150,000.

  • But there is another change that might affect some people. From 6 April higher earners personal allowance will have £1 for every £2 of income above £100,000 withdrawn.

  • Anyone with an income of £112,950 will pay tax on their entire earnings.

Personal allowances frozen

  • The Chancellor’s Budget confirmed that income tax allowances will be frozen in 2010/11 at a time when RPI is negative.

  • This might appear to be good news but in fact means that your tax bill will rise.

  • It also means more people will be dragged into the higher tax bands due to salary increases.

National Insurance Contributions frozen

  • The Budget froze all but two figures for National Insurance contributions.

  • The increases are £2 per week on the lower earnings limit and 10p on the special Class 2 rate for volunteer development workers.

Tax Credits changes

Child element

  • The Child Element of Tax Credits will be increased for those families with children aged one or two by £4 per week from April 2012.

Over 60s

  • From 6 April 2011, people aged 60 and over will qualify for Working Tax Credits if they work at least 16 hours per week.

Rates and thresholds

  • As announced in the 2009 Pre-Budget Report, from 6 April the child element of the Child Tax Credit will rise by £20 above indexation in April 2010.

  • This represents an increase of £65 in cash terms.

An increase by 1.5% in April 2010 will be made in relation to the following benefits:

  • Child Benefit

  • Guardian’s Allowance

  • The disability elements of the Child Tax Credit

  • All elements of the Working Tax Credit (apart from the childcare element)

The threshold for the receipt of the maximum Child Tax Credit award will be

increased to £16,190. All other rates and thresholds in tax credits are unchanged.

Stamp Duty Land Tax 2 year holiday

  • The Chancellor announced in the budget that no Stamp Duty Land Tax will be payable for first time buyers who purchase residential properties up to £250,000 between 25 March 2010 and 24 March 2012.

  • From the April 2011 budget a new Stamp Duty Land Tax rate of 5% on residential property sales over £1 million is to be introduced.

  • This budget change means first time buyers will benefit by saving £1250 on properties costing more than £150,000.

Capital gains tax unchanged

  • The standard rate for capital gains tax remains at 18%. The annual exemption threshold for capital gains tax will be frozen at £10,100.

  • The lifetime limit for Entrepreneur’s Relief is increased from £1,000,000 to £2,000,000 for 2010/11 so this benefits people looking to sell their business.

Inheritance tax threshold frozen

  • The Chancellor announced a freezing of the nil rate threshold at £325,000 for individuals and at £650,000 for married couples and civil partners.

  • This threshold will be frozen for until the budget dated 5 April 2015.

  • With the rise in property prices more people will be drawn into this tax net.

  • By freezing the tax rate the Chancellor has reversed an earlier announcement that it would be increased to £350,000.

Pension increase

  • In April 2010 the basic State Pension will increase by 2.5%.

  • A full basic State Pension will then be worth £97.65 a week.

  • A full couples’ rate will increase to £156.15 a week.

  • There will be an increase in the Pensions Credit’s minimum income guarantee to £132.60 for single pensioners and £202.40 for couples.

Pensions tax relief

  • The Chancellor announced changes to the tax relief on pension contributions which had previously been announced in the 2009 Budget.

  • At that time the Chancellor announced tax relief on pension contributions would be restricted from April 2011 for individuals with incomes of £150,000 or more.

  • The Government has now announced that the restriction will apply to those with gross incomes of £150,000 or more.

  • Where gross income incorporates all pension contributions, including the value of any pension benefit funded by, or eventually funded, by an individual’s employer.

Winter fuel allowance extended

  • The winter fuel allowance of £250 and £400 for the over 80’s is extended for another year.

Individual Savings Accounts (Isa’s)

  • For all individuals, irrespective of age, the maximum annual ISA investment in 2010/11 is £10,200, up to £5,100 of which can be saved in cash.

  • Remember, ISA’s are tax free in life but subject to IHT after death.

Fuel duty rate increases modified

  • The increase in Fuel Duty will be implemented in three stages: 1p per litre on 1 April 2010, 1p per litre on 1 October 2010, and 0.76 p per litre on 1 January 2011.

Alcohol and tobacco tax increased

  • Alcohol duty rates on beer, wine and spirits will increase by 2% above inflation.

  • Cider duty rates will increase by 10% above inflation.

  • These changes come into force at midnight on 28 March 2010.

  • From midnight on 28 March 2010 duty on tobacco will increase by 1% and by 2% in real terms each year until 2014.

Bingo duty

  • The rate of bingo duty is reduced to 20%.

Telephone Landline duty being introduced

  • A new landline duty on telephones will be introduced from 1 October 2010 to help fund the increase in broadband coverage.

  • The duty will be at a rate of 50 pence per fixed line.

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