Budget 2010 - Headlines

On Wednesday 24 March 2010 the Chancellor of the Exchequer delivered his Budget Report to the House of Commons. Below are outline details of the main points raised of which we wish to make you aware.

• The Annual Investment Allowance for plant and machinery will be doubled to £100,000 with effect from 6 April 2010 (1 April for companies).

This allowance allows businesses to reduce their taxable profit by the full amount of their annual expenditure on plant and machinery (not cars) up to £100,000 pa.

• The Capital Gains Tax Entrepreneurs Relief will be doubled to £2 million from 6 April 2010.

This life-time relief is broadly available on the sale, disposal or winding up of a business and means that the tax payable on such gains is calculated at an effective rate of 10%

• The new 50% additional rate tax charge applies from 6 April 2010 on taxable income in excess of £150,000.
• From 6 April 2010, the basic personal tax allowance will be gradually reduced to nil for those individuals with adjusted net incomes above £100,000.

The allowance will be reduced £1 for every £2 above the limit

• Personal tax allowances and other tax rates are unchanged from the previous year.

Normally personal tax allowances are increased each year in line with inflation

• The H M Revenue & Customs Business Payment Support Service which is in place to assist spreading the payment of taxes for those businesses affected by the economic climate, will continue.
• National Insurance rates will remain the same as the previous year. However, from 6 April 2011, in addition to the 0.5% increases previously announced, the main rates for employee Class 1 NIC and self-employed Class 4 NIC will increase by a further 0.5% to 12% and 9% respectively. Employer NIC for Class 1A and 1B will similarly increase to 13.8%. The additional rate for higher earners will be increased to 2% from 1%.
• The Inheritance Tax nil rate band will be frozen at the current level of £325,000 until tax year 2014/15.
• Zero emission vehicles will not attract the benefit in kind charge for company cars and vans for the five years from 6 April 2010 to 5 April 2015. Also the chargeable benefit on company cars will be reduced where a vehicle has approved CO2 emissions of 75g/km or less.
• Corporation Tax rates are unchanged – small companies rate 21% (for profits up to £300,000) and the main rate 28%.
• The VAT registration turnover threshold is increased to £70,000 from 1 April 2010.
• Powers will be introduced for HM Revenue & Customs to require a financial security from employers who have a history of paying their PAYE/NIC late without arrangement to do so.

Remember also that with effect from April 2010, HMRC will now charge interest on PAYE/NIC paid late

• The Stamp Duty Land Tax threshold has been increased for first time buyers from £125,000 to £250,000 for two years from 25 March 2010. This will be compensated for by a new rate at the top end of the scale of 5% for properties over £1 million, but will not apply until 6 April 2011.
• A temporary increase in the level of small business rate relief was announced for one year from 1 October 2010, to reduce business rates for small businesses.
• ISA savings limits will be increased in line with inflation each year accordingly from 6 April 2011.

For full details of the budget announcements, please see our detailed guide here