Speculation before the Budget was of significant tax rises in a number of different areas, but after the Chancellor’s announcements it almost seems that a sigh of relief is appropriate. It is generally held that the Chancellor did sufficient with a general election weeks away without upsetting any particular sector of the electorate. However do not be fooled as many of the increases announced in the Chancellor’s 2009 Budget have still to take effect!

Many of the areas in which change was predicted didn’t happen, most notably the standard rate of VAT remaining unchanged at 17.5% when an increase had been widely predicted.

Some of the key changes aimed at small businesses are: 

  • Annual Investment Allowance doubled to £100,000.

Most businesses are able to claim 100% tax relief on investment in qualifying plant and machinery (excluding motor cars) subject to an annual limit of £50,000. From 1 April 2010 (corporation tax) and 6 April 2010 (income tax) the annual limit will be increased to £100,000.

  • Time To Pay scheme made permanent.

The Chancellor announced that the time to pay scheme introduced by H M Revenue & Customs under which businesses can defer tax payments is to be made permanent. To date the scheme has helped to spread the burden of £5 billion worth of tax payments.

  • Entrepreneurs’ Relief for Capital Gains Tax doubled to £2million.

Capital Gains Tax Entrepreneurs’ Relief was introduced from 6 April 2008. Entrepreneurs’ Relief reduces the effective rate of capital gains tax on qualifying gains to 10%. The relief is currently subject to a lifetime limit of £1m of gains. This lifetime limit will be increased to £2m with effect for disposals made on or after 6 April 2010. Those who have already used their lifetime limit of £1m will be able to claim relief on up to a further £1m of gain. The other rules for Entrepreneurs’ Relief remain unchanged.

  • Capital Gains Tax held at 18%

Capital gains continue to be taxed at a flat rate of 18%. The annual exemption also remains frozen at £10,100 for 2010-11.

  • Business Rates to be cut form October 2010

Businesses operating from premises with a rateable value of up to £12,000 will be cut for one year from October 2010.

  • Banks made to lend £94 billion in new loans to businesses.

Banks will be instructed to make available £94 billion of cash for lending to businesses with approximately half targeted at small firms.

  • No change to Corporation Tax Rates.

The Chancellor made no changes to either the main or small company’s rate of Corporation Tax for the year 2010/11. It will remain at 28% and 21% respectively. However the planned increase to the small company’s rate from 21% to 22% will still go ahead with effect from 1 April 2011.

For individuals no great changes were announced in the current budget however the effects of earlier announcements in some cases have still to come into force as planned for 2011/12 including the increase in National Insurance Contributions for both employers and employees. Whether these changes ever take effect will of course depend on the outcome of the forthcoming election. Here are some of the key changes we can expect based on current announcements and legislation.

  •  Personal Allowances

For 2010/11 personal income tax allowances are frozen at the current level. The Chancellor also announced that the basic rate of tax (20%) would remain unchanged together with the threshold (£37,400) at which higher rates of tax would become payable.

With effect from the 6 April those individuals earning over £100,000 will see their personal income tax allowance withdrawn by £1 for every £2 of income over the above ceiling. Therefore anyone earning in excess of £112,950 will lose the personal allowance completely and pay tax at the appropriate rate on all earned income.

  • Personal Pensions

As announced in the December Pre Budget report tax relief on pension contributions will be restricted to basic rate for those with income in excess of £180,000. Those with earnings in the band £150,000 to £160,000 will see their tax relief reduced proportionately until they reach the £180,000 limit.

The Chancellor also confirmed the £130,000 threshold on pensions anti forestalling measures.

  • Individual Savings accounts (ISA’s)

As announced in the 2009 Budget, from 6 April 2010, the ISA annual subscription limit is increased to £10,200 of which £5,100 can be saved in cash. It has been announced that from 6 April 2011 the ISA limits will be increased in line with the Retail Prices Index (‘RPI’) on an annual basis.

  •  Stamp Duty Land Tax

The starting threshold for SDLT will increase to £250,000 for first time buyers who purchase a residential property on or after 25 March 2010 and before 25 March 2012. A first time buyer is an individual who has not previously purchased an interest in residential property anywhere in the world.

A new 5% higher rate of SDLT will apply to residential property purchases of more than £1m where the completion date is on or after 6 April 2011. Therefore, property purchases of more than £1m in the next 12 months will continue to be charged to SDLT at the current higher rate of 4%.

As a Bottom Line Express subscriber, you are can take advantage of our Budget Clinic, where you are able to receive 15 minutes of free advice on any aspect of the Budget and what it will mean to your business. Call 01455 852555, quoting BLE1 and take advantage of our expert advice.