Budget 2009

Personal tax

The Chancellor has announced tax changes to those individuals with the highest income to take effect from 6 April 2010 and these are as follows:-

  • the highest rate of income tax will be 50% on income over £150,000, with a rate of 42.5% for dividends, and the value of the personal allowance will be gradually reduced to nil for those with income over £100,000
  • from 6th April 2011 tax relief on pension contributions will be restricted to the basic rate of tax for individuals with an annual income of £150,000 or higher
  • as the above does not come into effect until 2011 the Chancellor has also introduced legislation with effect from 22 April 2009 to restrict tax relief to basic rate for people whose income is £150,000 or more who change their normal ongoing regular pension savings and whose total pension contributions are in excess of £20,000

Furnished holiday lettings

It has been announced that furnished holiday letting rules are to be completely repealed from 6 April 2010, so some or all of the favourable treatments for income tax loss relief, certain capital gains reliefs and being treated as relevant earnings for pension contributions purposes could potentially disappear from that date.

Trust Taxation

From 6 April 2010 the trust rate of tax will increase from 40% to 50% and the dividend trust rate will be 42.5%.

Business matters

Losses

The Chancellor has extended the ability to carry back trading losses against profits of earlier years to get a repayment of tax. This measure applies to companies with an accounting period ending in the period 24 November 2008 to 23 November 2010 and for the tax years 2008/09 and 2009/10 for the self employed. There is a limit on the amount of losses which can be carried back past the preceding year and that is £50,000.

Example

Business A makes a loss in 2008/09 of £130,000. It had profits of £70,000 in 2007/08 and £60,000 in 2006/07. Relief for the loss of £130,000 is claimed and will be relieved as follows:-

  • Profit 2007/08: £70,000
  • Profit 2006/07:£50,000

This will generate tax repayments in respect of the 2007/08 and 2006/07 years.

The balance of the loss unrelieved £10,000 must be carried forward.

It should be noted that if business A makes a further loss in 2009/10 then it can make a claim to carry £10,000 of the loss back to 2006/07.

Capital Allowances

The Chancellor has temporarily introduced for a 12 month period, a 40% first year tax relief available on expenditure on general plant and machinery, which would normally be allocated to the main capital allowance pool.

It should be noted this is in addition to the 100% capital allowances available on qualifying expenditure up to £50,000.

Business rates

Businesses will be able to spread payment of this year's inflation up-rating over three years.

Publishing the names of deliberate tax defaulters

HMRC will be able to publish the names and details of all those who are penalised for serious defaults leading to a loss of tax of more than £25,000.

The measure will apply to individuals, businesses and companies who are penalised for deliberate or deliberate and concealed defaults, but will not affect those who make an unprompted disclosure, or full prompted disclosure. In addition to the normal right of appeal against all aspects of a penalty, taxpayers will be informed prior to publication and will be able to make representations to HMRC. Details will be published quarterly within 1 year of the penalty becoming final and will be removed from publication 1 year later.

The measure will be brought into effect from a date to be announced by Treasury Order.

General budget matters

Stamp duty land tax 'holiday' extension

The Chancellor has announced an extension to the temporary exemption from Stamp Duty Land Tax for acquisitions of residential property worth no more than £175,000. The holiday now applies to acquisitions between 3 September 2008 and 31 December 2009.

The exemption has to be claimed on form SDLT1, it is not given automatically.

VAT

It should be remembered that the temporary 15% rate will cease on 31 December 2009 when the standard rate of VAT will return to 17.5%.

Increased VAT turnover thresholds for registration and deregistration:

  • the turnover thresholds where a taxable person must register for VAT increases from £67,000 to £68,000
  • and the turnover thresholds for deregistration purposes increases from £65,000 to £66,000

ISA's

The limits for investing in ISA's are to be raised to £10,200, of which £5,100 can be saved in cash. The new limits will apply in the first instance to people aged 50 and over in 2009-10 and to all investors from 2010-11 onwards.

Car scrappage scheme

Customers who scrap vehicles older than 10 years to replace them with a new vehicle will receive a discount of £2,000 on the price of the new vehicle.

Redundancy pay

An increase in the maximum level of statutory redundancy pay to £380.00 per week, date to be advised.

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