Introduction

With the country likely to go to the polls on 6 May, Mr Darling’s third Budget was predictably as much a political exercise as a conventional set of announcements. While many of the measures had been set out in last December’s Pre-Budget Report, there were also some surprises. These included the increased stamp duty land tax rate on residential property over £1 million from 6 April 2011 and the doubling of capital gains tax entrepreneurs’ relief to £2 million only two years after its introduction.

The parliamentary timetable is such that much of the Budget will not become law before the current session of Parliament ends (12 April for a 6 May election).

Past experience (eg 2005) suggests that there will be a relatively short and non-controversial Finance Act rapidly enacted before the election. A longer and more contentious Bill will then be introduced in the new Parliament, whatever happens at the polls. The Conservatives are committed to introducing another Budget within 50 days of the election if they win.

Budget highlights

• Freezing the inheritance tax nil rate band at £325,000 between 6 April 2010 and 5 April 2015.
• Confirming the ISA allowance as £10,200 for 2010/11 and indexing it thereafter.
• Doubling the capital gains tax entrepreneurs’ relief to £2 million per person for disposals after 5 April 2010.
• Doubling the annual investment allowance for investment in plant and machinery to £100,000 a year from April 2010.
• Confirming that the small companies’ corporation tax rate will remain at 21% for 2010.
• Increasing the stamp duty land tax rate from 4% to 5% for purchases of residential property over £1 million starting in 2011/12.
• Raising the threshold for stamp duty land tax to £250,000 for first time buyers from 25 March 2010 for two years.
• Substantially increasing the minimum amount a VCT must invest in eligible shares.
• Imposing standard rate VAT on postal packets and parcels from 31 January 2011.
• Confirming the revised restrictions on pension tax relief from 2011/12.
• Introducing a penalty for tax evasion of up to 200% where there is an offshore element.