| Budget Summary 2009
1. Income Tax
1.1 Income Tax Rates and Allowances
For 2009/10 the Personal Allowance increases to £6,475. The Personal
Allowance for those over 65 will be increased to £9,490 and for those
aged 75 and over to £9,640
The following changes will apply from 6 April 2010:
• A new higher rate of Income Tax of 50% on taxable income above £150,000. This replaces the 45% rate announced in November;
• Personal allowances for individuals with ‘adjusted net incomes’ above
£100,000 will be reduced by £1 for every £2 above the income limit.
This is instead of the two stage reduction announced in the Pre-Budget
Report. This effectively creates a higher marginal tax rate of 60% on
income between £100,000 and £112,950.
From 6 April 2010 there will be three rates of tax for dividends for individuals:
• Dividends otherwise taxed at 20% basic rate will continue to be taxed at 10%;
• Dividends otherwise taxed at 40% higher rate will continue to be taxed at 32.5%;
• Dividends otherwise taxed at the new 50% additional rate will be taxed at a new 42.5% dividend additional rate.
1.2 Increasing Individual Savings Accounts (ISA) Limits
For 2009/10, the ISA limit available to people aged 50 and over will
be increased to £10,200, of which £5,100 can be held in cash. The
remainder can be invested in stocks and shares with the same or another
provider. This limit will be raised with effect from 6 October 2009.
From 6 April 2010, these new limits will apply to all ISA investors.
2. Capital Gains Tax
2.1 Capital Gains Tax Rates
There are no changes to either the main capital gains rate of 18% or the Entrepreneurs’ Relief rate of 10%.
However the annual exemption will be increased by £500 to £10,100
for individuals and £250 to £5,050 for most trustees from 6 April 2009.
3. Corporation and Business Tax
3.1 Corporation Tax Rates
The main rate of Corporation Tax will remain at the current rate of 28%.
The Small Companies Rate will remain at 21% for 2009-10. The planned
rise to 22% has been deferred to 1 April 2010, as announced in the 2008
Pre-Budget Report.
The thresholds for the Small Companies Rate and the Main Rate remain at £300,000 and £1,500,000 respectively.
The marginal rate of corporation tax applying to profits between £300,000 and £1,500,000 will continue to be 29.75%.
3.2 Loss Carry Back
Businesses, including unincorporated businesses, will be able to carry
back trading losses for offset against profits of earlier years and so
obtain a repayment of tax.
The extension will apply to:
Company accounts ending in the period 24 November 2008 to 23 November 2010 and
Tax Years 2008/09 and 2009/10 for unincorporated businesses.
This extends the measures announced in the 2008 Pre-Budget Report by a further year.
The effect of the relief will be to extend the period for which
trading losses can be carried back from the current one year to three
years, with the carry back against later years first. However, the
amount that can be carried back beyond the current one year will be
restricted to £50,000.
3.3 Capital Allowances
A new temporary first-year allowance (FYA) of 40% is introduced for expenditure on general plant and machinery.
This expenditure will include expenditure on general plant and
machinery that would normally be allocated to the main capital
allowances pool qualifying for writing-down allowances at 20%.
The temporary FYA will apply to qualifying expenditure incurred in the 12 month period beginning on
• 1 April 2009 for businesses within the charge to corporation tax and
• 6 April 2009 for businesses within the charge to income tax.
Businesses will continue to be able to claim the Annual Investment
Allowance (AIA) on the first £50,000 spent on all types of qualifying
capital expenditure.
3.4 Tax Relief for Business Expenditure on Cars
Businesses get relief for expenditure incurred on cars in the form
of writing down allowances (WDA) at 20%. This is restricted to £3,000
in the case of expensive cars costing more than £12,000. Expenditure on
such cars is accounted separately with each car placed in a single
asset pool.
The existing rules will be replaced for qualifying expenditure incurred on cars on or after
• 1 April 2009 for businesses within the charge to corporation tax and
• 6 April 2009 for businesses within the charge to income tax.
Expenditure on cars will be allocated to one of two general plant and
machinery pools depending on whether or not their CO2 emissions exceed
160g/km.
Expenditure on cars with CO2 emissions of 160g/km or less will be
added to the main rate pool and attract WDA at 20% and expenditure on
cars with CO2 emissions exceeding 160g/km will be dealt with in a
special rate pool and attract WDA at 10%.
Cars that have an element of non-business use will continue to be
dealt with in single asset pools to enable private use adjustments, but
the rate of WDA will still depend on the CO2 emissions.
4. Indirect Taxes
4.1 Rate
With effect from 1 January 2010 the standard rate of VAT will revert from 15% to 17.5%.
4.2 Registration Limit
The VAT registration threshold will rise by £1,000 to £68,000 from 1
May 2009. The de-registration limit rises similarly to £66,000.
4.3 Fuel Scale Charges
Whenever a business funds private motoring by subsidising fuel, it
must account for VAT fuel scale charges, that is, output tax.
The revised scale charges are based on the level of CO2 emissions, and
range from a quarterly charge of £126 (VAT inclusive) on a car with CO2
emissions of 120gms/km or below to £441 (VAT inclusive) for a car with
emissions of 235gms/km or above.
HMRC have published tables showing the revised scale charges for a 12 month, three month and one month accounting period.
Businesses must use the new scales from the start of their first accounting period beginning on or after 1 May 2009.
5. Stamp Duties
5.1 Stamp Duty Land Tax
In September 2008, the Chancellor announced that no Stamp Duty Land
Tax (SDLT) would be payable on residential property purchases where the
purchase price did not exceed £175,000 and the transaction was
completed between 3rd September 2008 and 2nd September 2009.
Legislation will be introduced in Finance Act 2009 and will ensure that
that no SDLT will be payable on residential property purchases of up to
£175,000 for a further period. This legislation will affect all
residential property purchases of up to £175,000 transacted in the
period 22nd April 2009 to 31st December 2009. After this date the
threshold at which SDLT will become payable on such purchases will be
reduced from £175,000 to £125,000.
6. Miscellaneous
6.1 Publicity
HMRC propose to publish the names and details of individuals,
businesses and companies who are penalised for deliberate defaults
leading to a loss of tax of more than £25,000.
Those who make a full unprompted disclosure or a full prompted
disclosure within the required time (to be specified by HMRC) will not
be affected. There will be a right of appeal to an independent
tribunal. Details will be published (when all appeal avenues are
exhausted or expired) on quarterly lists on HMRC’s website within one
year of the penalty becoming final and will be removed from the website
one year later.
The provisions will be brought into effect at an, as yet unspecified, future date by Treasury Order.
The above is for information only and is not intended to be specific advice.
For further information please contact either:-
Alastair Vickers or Paul Stone
at
AYRES BRIGHT VICKERS
Telephone: 01903 234552
Email: abv@aresbrightvickers.co.uk |