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Watling and Hirst Limited, Chartered Certified Accountants and Registered Auditors - Chichester, West Sussex > News > 2009 Budget

2009 Budget

Posted on Wednesday, 22 April 2009 01:58PM by MH
The Chancellor, Alistair Darling, presented his budget on 22 April 2009. A brief summary of the major headlines is given below. The impact of these changes and the opportunities and threats that they present in terms of tax liabilities will only become apparent after a thorough review of the detailed press notices issued by the Revenue. The points below are therefore for general guidance only.

Personal Income Tax
The following changes to tax rates and allowances for taxpayers with income over £100,000 were announced (these have changed from the announcements made in the 2008 Pre-Budget Report):
  • from 2010-11, there will be an additional higher rate of 50 per cent for taxable income above £150,000 (the corresponding dividend rate will be 42.5%);
  • from 2010-11 the basic personal allowance for income tax will be gradually reduced to nil for individuals with “adjusted net incomes” above £100,000; and
  • from 2010-11 there will be increases to the trust rate and dividend trust rate to match those for income tax. Initial interpretation suggests that the new higher rate will apply to the entire income of trusts.
Pension Contribution Relief
The Chancellor has announced that, starting in 2011-12, tax relief on pension contributions will be restricted to basic rate for individuals with an annual income of £150,000 or higher. This means that relief will now only be given at 20%.

There will be special rules which will apply from Budget Day (22 April 2009) to prevent people from making large additional contributions to their pensions before then in order to benefit from higher rates of tax relief while it is still available. It would appear that significant company contributions may still be possible and personal contributions may continue where there is an established history on contributions.

Furnished Holiday Lettings
From 2011/12 losses from furnished holiday accommodation will not be able to be set against other personal income. In the meantime it will be possible to set losses from furnished holiday accommodation situated in the European Economic Area against other personal income.

Cash ISA limits
From 2009/10 the ISA limits for people aged 50 and over will be raised to £10,200, of which £5,100 can be held in cash. The ISA limits will be raised for all investors by the same amount from 6 April 2010.

Loss Relief
The support announced by the Chancellor at the November 2008 Pre Budget Report will be extended for a further year. This allows businesses to carry back trading losses against profits of earlier periods.

Losses of up to £50,000 arising in a twelve month accounting period ending between 24 November 2008 and 25 November 2010 may be carried back up to three years.

Corporation Tax Rates
The main rate for FY 2010 will be 28per cent and the small companies rate will be 21per cent. These remain unchanged from FY 2009. 

Capital allowances
The Chancellor has announced a new temporary 40 per cent first-year allowance (FYA) for expenditure on general plant and machinery will apply to qualifying spending incurred in the 12 month period beginning on 1 April 2009 for corporation tax, and on 6 April 2009 for income tax.

VAT
The temporary rate of 15per cent will cease on 31 December 2009, and the standard rate of VAT will return to 17.5 per cent from 1 January 2010. Legislation will be introduced to counter schemes which purport to apply the temporary rate after 31 December 2009.

The VAT registration threshold has been increased to £68,000.

Business Payment Support
The Business Payment Support Service announced at the Pre Budget Report in November 2008 is now being extended for those businesses which are genuinely unable to pay their outstanding liability immediately or enter into a reasonable time to pay arrangement.
Where a viable business is due to pay tax on the previous year’s business profits and is likely to make a trading loss in the current year, those losses can be taken into account when agreeing the level of payments to be made.

Stamp Duty
The Chancellor announced an extended “holiday” from stamp duty land tax (SDLT) which exempts any acquisitions of residential property of not more than £175,000. The holiday now applies to acquisitions between 3 September 2008 and 31 December 2009 inclusive. After that date the SDLT threshold for residential property will revert to £125,000.

To discuss how the announcements within the 2009 budget affect your tax liabilities, please contact us.
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