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2009 Budget

2009 Budget

 

Victoria Bishop, Tax Partner at robinson+co, gives her opinion, together with a summary, of the main Budget headlines.

 

A Bumper Year!

Alistair Darling’s 2009 Budget Speech lasted about 50 minutes – but the adage “the devil’s in the detail” proved to be more than apt when it emerged that the supporting press releases and Budget Notes extended to over 250 pages and 93 separate releases.

The headline has to be the announcement that Government lending will reach £175billion for 2009/10, being 79% of the UK’s GDP, but what does this mean for you?

New Labour has been accused of cosying up to the business world, but it is probably fair to say that this is at an end due to the much mooted withdrawal of higher rate tax relief on pension contributions for those earning more than £150,000 pa plus the double whammy of the new higher income tax rate being increased to 50% and being brought forward a year.

Not mentioned in the speech but confirmed in the press notes, those earning more than £100,000 pa will also see the tapered withdrawal of the personal allowance introduced from April 2010, and if you are affected by the 50% rate, then dividends will be taxable at 42.5% rather than 32.5%.

“Help for Business”

How much help the measures will actually provide remains to be seen, especially as the Government seems to be encouraging expenditure on the one hand whilst accepting that cash flows will be restricted on the other, but among those announced:

 

  • Capital Allowances - First Year Allowances at 40% are reintroduced for 12 months to 1 April 2010. This means that any capital expenditure in excess of £50,000 will be relieved at 40% instead of 20%. If you are anticipating large purchases, please contact us at robinson+co before you commit to ensure that the maximum tax benefits can be obtained.
  • The uprating to business rates can be spread over 3 years
  • Trading losses incurred in 2009/10 as well as 2008/09 or from 24 November 2008 to 23 November 2010 for incorporated businesses can be set against any profits of the previous three years. This only applies to losses up to £50,000
  • The Business Payment Support Service will continue with H M Revenue & Customs treating requests to spread tax payments sympathetically.

What the Chancellor did not do, however, was announce any major changes to VAT. The standard rate will revert to 17.5% on 1 January 2010 as per November’s Pre Budget Report. However, you should note that the registration limit is now £68,000 and the de-registration limit £66,000.  Fuel Scale Charges have also changed with effect from your next VAT period which commences on or after 1 May 2009.

If you have any VAT queries please contact our VAT expert Roger Troughton.

Those in business should also be aware that with effect from 6 April 2009 the claiming of capital allowances on business cars is linked to the CO2 emissions. Cars with emissions under 160g/km will attract allowances at 20% in the same way as other plant and machinery. Vehicles with emissions over 160g/km, however, will attract capital allowances at 10% only.

Big, Bad News for Cumbria

Hidden way back in the published details is a Technical Note that announces H M Revenue & Customs’ intention to abolish the favourable tax regime for furnished holiday lettings from 2010. Unlike other rental losses, losses from furnished holiday lettings can be set against other income and the loss of this advantage is likely to be a major blow to many owners of holiday lettings in Cumbria.

Further details are emerging but if other tax advantages in capital gains and inheritance taxes are also lost, this could adversely affect the provision of holiday cottages in Cumbria.

If you are affected by this, please contact us as soon as possible to discuss the way forward.

ISA Limits

Keeping one eye on people who are not helped by low interest rates the Chancellor also announced that the ISA limit will increase on 6 October 2009 by nearly £3,000 for those aged over 50, and for the rest of the population on 6 April 2010.

If you have already paid £3,600 into a 2010 cash ISA, come October you may be able to shelter a further £1,500, plus the same amounts into share ISAs. Please contact David Hopkinson, our Financial Services Partner, for further advice.

Tax Credits and Child Trust Funds

Those who claim the child element of Tax Credits will gain an extra £20 above inflation per child from April 2010. Also, the government will provide an extra £100 (£200) to the Child Trust Funds of children with a (severe) disability.

Winter Fuel Allowance

Those aged over 60 will receive a further £50 (£100 if you are over 80) Winter Fuel Allowance in winter 2009/10.

Stamp Duty

Stamp Duty on houses costing £175,000 or under will remain at 0% until 31 December 2009. If you are looking to purchase a home, contact David Hopkinson to see if he can help with your mortgage requirements.

Old Cars

The Chancellor also announced a scheme to cash in your over-10-years-old-car for £2,000. Precise details of the scheme are not available yet but you must have owned the vehicle for 12 months to qualify for the £2,000.


The Important Things

 

  • Alcohol duties went up 2% at midnight on Budget Day – a pint now costs 1 penny more
  • Tobacco duties went up 2% at 6pm on Budget Day – 20 cigarettes now cost 7p more.
  • Fuel duty will increase by 2p per litre on 1 September 2009, which will mean duty on one litre of fuel will amount to 56.19p. 

Tax Rates for 2009/10:

 

Personal Allowance (under 65)

£6,475

Personal Allowance (65-74) (depending on income)

£9,490

Personal Allowance (over 75) (depending on income)

£9,640

 

 

Basic Rate of Income Tax

20%

Higher Rate barrier

£37,400

 

 

Capital Gains Tax Annual Exemption

£10,100

 

 

Inheritance Tax Nil Rate Band

£325,000

 

 

Corporation Tax

 

Profit under £300,000

21%

Profit over £300,000 (subject to marginal relief)

28%

 

 

 

Road Tax

 

VED Band

 

 

CO2 Emissions (g/km)

Standard Rate 2009-10

Standard Rate 2010-11

 

New Cars

2010-11

A

Up to 100

£0

£0

£0

B

101-110

£35

£20

£0

C

111-120

£35

£30

£0

D

121-130

£120

£90

£0

E

131-140

£120

£110

£110

F

141-150

£125

£125

£125

G

151-165

£150

£155

£155

H

166-175

£175

£180

£250

I

176-185

£175

£200

£300

J

186-200

£215

£235

£425

K

201-225

£215

£245

£550

L

226-255

£405

£425

£750

M

Over 255

£405

£435

£950

 

Offshore Disclosure

If you failed to take advantage of the last opportunity H M Revenue & Customs are offering another chance to come clean. If you do have offshore investments of which we or HMRC are unaware, it is important that you contact us at robinson+co as soon as possible.

Lastly, be warned, if you deliberately fail to pay tax over £25,000 in the future, then H M Revenue & Customs will “name and shame” you in quarterly lists – we at robinson+co are here to help you stay off such lists – please contact us if you have any queries.

This is a resume of the 2009 Budget, but if you want guidance on how the changes will affect you please feel free to contact Victoria Bishop, Tax Partner.

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