As you will be aware, the government has announced a number of changes in the Budget speech delivered 22 April. Below is a headline summary of a selection of the key points that may impact you and your business.
1. Income Tax
From 2010/11 the following changes will take effect:
- There will be an additional higher rate of income tax of 50% for those with taxable income over £150,000
- The basic personal allowance for income tax will be gradually reduced to nil for individuals with 'adjusted net income' over £100,000. The amount of allowance will be reduced by £1 for every £2 above the limit
- There will be increases to the trust rate (to 50%) and dividend trust rate (to 42.5%) to match the increased rates for income tax
2. Capital Allowances
- There will be a new temporary 40% first year allowance (FYA) for expenditure on general plant and machinery (expenditure that would normally be allocated to the main capital allowance pool). This temporary FYA is available to qualifying spending in the 12 month period from 1 April 2009 for corporation tax purposes, and 6 April 2009 for income tax purposes. This 40% FYA will be used for additions in excess of the £50,000 Annual Investment Allowance.
3. Personal Dividends
- Individuals in receipt of dividends from non-UK resident companies, where they have more than a 10% holding, will receive a non-payable tax credit reducing the tax payable on those dividends to either 0% for basic rate tax payers or 25% for higher rate taxpayers. This brings the rules in line with normal UK dividends.
4. Pension Contributions
- Individuals with income of over £150,000 will be subject to a restricted tax relief on their pension contributions from 22 April 2009. There appears to be a lot of detail surrounding this measure which may make it more restrictive in its application than first thought. More detail will follow on this point.
5. Individual Savings Accounts
- The ISA limit has been increased to £10,200, with up to £5,100 allocated to cash savings. The new limit applies to the over 50s from 6 April 2009, and to all other investors from 6 April 2010
6. VAT
- The VAT reduction to 15% will be in place until December 2009.
7. Company Cars
- Legislation will be introduced in Finance Bill 2009 to set the company car tax rates for 2011/12 and subsequent years. The lower threshold CO2 emissions figure will be reduced to 130g/km for 2010/11 and 125g/km for 2011/12.
8. Tax Relief for Business Expenditure on Cars
- This will affect all businesses that buy or lease cars. Qualifying expenditure on cars, on or after 1 April 2009, will be allocated to one of the two general plant & machinery pools depending on the car's CO2 emissions. Cars with emissions over 160g/km will be dealt with in a special pool with WDAs of 10%. Cars with emissions of less than 160g/km will be added to the main pool and attract WDAs at 20%.
9. Corporation Tax
- The ability for companies to carry back losses up to a cap of £50,000 in years 2 and 3 will be extended to 2010.
10. Enterprise Investment Scheme and other Venture Capital Schemes
- A number of improvements have been announced that will affect the Enterprise Investment Scheme, Corporate Venturing Scheme and the Venture Capital Trust Scheme. In summary, a number of anomalies have been corrected, the most pertinent of which is the income tax carry back relief under EIS. The restrictions that are currently in place (ie, shares issued prior to 6 October and a cap of £50,000) are now removed, providing a much wider income tax carry back relief.
Note that a number of changes to rates and allowances had already been announced in the Pre-Budget Report and a link to the Robson Taylor website that summarises these particular changes is provided below for reference:
As with all these measures they are announcements only at this stage and the detail will come over the next few months as the Finance Bill progresses through the political process. As a result, we will endeavour to keep you up to date with any developments that may impact you directly. A more detailed Budget summary will be posted on the Robson Taylor website shortly.
Date:22 April 2009
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