Budget summary with members in mind

The CLA has compiled a budget report summarizing the main changes and highlighting some issues which could affect members.

1.       Income Tax

 

Personal Allowances

 

Allowances	2009-10
Personal allowance (age under 65)	£6,475
Personal allowance with incomes over £100,000	£ 0
Personal allowance (age 65-74)	£9,490
Personal allowance (age 75 and over)	£9,640
Married couple's allowance* (aged less than 75 and born before 6 April 1935)	**
Married couple's allowance* (age 75 and over)	£6,965
Married couple's allowance* - minimum amount	£2,670
Income limit for age-related allowances	£22,900
Blind person's allowance	£1,890

 

* Married couple's allowance is given at the rate of 10 per cent.

** In the 2009-10 tax year all in this category will become 75 at some point and will therefore be entitled to the age 75 and over allowance.

 

Income tax rates

 

2009-10	£ per year
Starting savings rate: 10%*	£0-£2,440
Basic rate: 20%	£0-£37,400
Higher rate: 40%	£37,400 -£150,000
"Top Rate" 50%	Over £150,000

 

*There is a 10p starting rate for savings income only. If an individual's non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income.

 

Tax rate on dividends

 

2009-10	Dividend Rate
Basic rate: 20%	10%
Higher rate: 40%	32.5%
"Top Rate" 50%	42.5%

 

 

Tax rate applicable to trusts

From 6 April 2010 the rate applicable to trusts will rise from 40% to 50%, with a dividend trust rate of 42.5%.

 

 

 

 

 

 

 

 

 

 

 

 

2.        National Insurance

 

 

 

£ per week (unless stated)	2009-10
Lower earnings limit (primary Class 1)	£95
Upper earnings limit (primary Class 1)	£844
Upper accruals point	£770
Primary threshold	£110
Secondary threshold	£110
Employees' primary Class 1 rate between primary threshold and upper earnings limit	11%
Employees' primary Class 1 rate above upper earnings limit	1%
Employees' contracted-out rebate - salary-related schemes	1.6%
Employees' contracted-out rebate - money-purchase schemes	1.6%
Married women's reduced rate between primary threshold and upper earnings limit	4.85%
Married women's rate above upper earnings limit	1%
Employers' secondary Class 1 rate above secondary threshold	12.8%
Employers' contracted-out rebate, salary-related schemes	3.7%
Employers' contracted-out rebate, money-purchase schemes	1.4%
Class 2 rate	£2.40
Class 2 small earnings exception (per year)	£5,075
Special Class 2 rate for share fishermen	£3.05
Special Class 2 rate for volunteer development workers	£4.75
Class 3 rate (per week)	£12.05
Class 4 lower profits limit (per year)	£5,715
Class 4 upper profits limit (per year)	£43,875
Class 4 rate between lower profits limit and upper profits limit	8%
Class 4 rate above upper profits limit	1%

 

 

 

 

 

 

 

3.        Savings

 

ISA limits to increase to £10,200 (£5,100 for cash ISAs) from April 2010 (April 2009 for over 50s)

 

4.       Pensions

Relief for pension contributions will be restricted to basic rate from 6 April 2011 for those with taxable income of £150,000 or more.  There are forestalling provisions to curtail exploitation operating from 22 April 2009. 

5.       Inheritance Tax

 

Threshold for 2009/10 is £325,000

With effect from 22April 2009, inheritance tax agricultural property relief and woodlands deferment relief are extended to property in the European Economic Area (EEA) rather than restricted to property situated in the UK, Isle of Man and Channel Islands.  Of course, this suggests APR is here to stay otherwise the Jäger decision – which has caused this change – would have been used as the 'excuse' to curtail APR.

6.       Capital Gains Tax

 

Annual Allowance increased to £10,100

 

7.       Corporation Tax

 

Profit Level	Rate
Profits below £300,000	21%
Profits between £300,000 and £1½m	29¼%
Profits over £1½m	28%

For corporate trading losses sustained in accounting periods ending in the year 24 November 2008 to 23 November 2010 and for unincorporated trading losses arising in tax years 2008/09 and 2009/10, loss may be carried back 3 years (rather than 1 year) using profits of later years first.

8.       Capital Allowances

A new 'temporary' first year capital allowance of 40% on plant and machinery expenditure is introduce for the financial year 2009 (or unincorporated 6 April 2009 to 5 April 2010).  In effect, this benefits expenditure in that year above £50,000 (which still gets 100% Annual Investment Allowance) other than expenditure on the following ((a) – (d) of which still qualify for 100% First Year Allowances and (e) to (f) which are excluded):

a.        energy saving plant or machinery; and

b.        new low-emission cars; and

c.        new refueling equipment; and

d.       environmentally beneficial P&M to improve water quality or water use (though there are revisions to what qualifies under this head

e.        long-life assets; and

f.         integral features; and

g.       cars; and

h.       leasing assets.

9.       VAT

The Standard rate for VAT increases back to 17.5% from 1 January 2010

 

VAT registration threshold increase from £67,000 to £68,000

 

 

 

10.   Furnished Holiday Lets

Furnished Holiday Lets have been treated as a business rather than an investment activity. This is to be abolished from April 2010. It is understood to mean that owners of these properties will, from that date, be treated as ordinary landlords.

 

It is thought that the effect of this will be:

 

Income Tax

·          assessment under what was Schedule A, not D:

·          limiting the ability to use losses against other profits (and vice versa),

·          not available as relevant earnings for pensions contributions

·          loss of Capital Allowances (but "wear and tear" relief may be available)

·          but income will not be subject to National Insurance

Capital Gains Tax

·          no longer being a business asset will deny Rollover Relief, Holdover Relief and Entrepreneurs' Relief

11.   Cars and Fuel

Fuel Duty to increase 2p per litre from 1 September 2009

Temporary vehicle scrappage scheme enabling consumers to get a £2000 discount on a new car when they trade-in a vehicle more than 10 years old.

12.   Housing

Extension of SDLT holiday for houses costing less than £175,000 to 31st December 2009

£600 million package of support aimed at kick-starting house building, including £100 million for local authorities to build energy efficient homes.

£375 million to support energy and resource efficiency in homes, businesses and public buildings

introduction of Community Infrastructure Levy delayed until April 2010

13.   Waste and Renewables

The standard rate of Landfill Tax will increase by £8 per tonne to £32 per tonne from 1 April 2009. 

£10 million of new grants for businesses to deliver anaerobic digestion and composting facilities

The aggregates levy will be frozen at £2 per tonnes for 2010 – 2011

£45 million through the Low-Carbon Buildings Programme for small scale renewable electricity and heat ventures

14.   Penalties and Time Limits

New aligned penalty regime for mainstream taxes.  These include:

·          £100 automatic penalties for late filing + £10 per day after a further 3 months + additionally 5% of tax after 6 months + additional 10% of tax after 12 months + 70% tax penalty for deliberate mistakes or 100% for deliberate concealment

·          5% of tax for late payment + additionally 5% after 6 months and again another 5% after 12 months.

The new aligned time limits are applied to inheritance tax.  Generally speaking this means that Claims are limited to a time limit of 4 years (variable at present) and mistakes can be corrected within the same 4 years (6 years at present). However note HMRC have 20 years (currently 6 years) to correct mistakes that are deliberate.