2009 Budget Summary
Alastair Darling delivered his second budget on 22nd April 2009.
Much of the content had already been announced in the 2008 Pre Budget Statement, but a number of changes were made to the previously announced proposals.
As has been the practice in recent years, the speech itself was short and the detail was included within budget notes released immediately after the speech.
A summary of the main provisions of relevance, particularly to small businesses is set out below.
Personal Allowances
The personal allowance for 2009/10 is increased by £410 to £6,475. The allowance for those aged between 65 and 74 has increased to £9,470 and for those aged over 75 to £9,640. The excess above the standard personal allowance is tapered away at the rate of £1 for every £2 of income where total income exceeds £22,900.
As announced in the Pre Budget Statement, from 6th April 2010 personal allowances will be tapered to nil at a rate of £1 for every £2 of income where an individual’s income exceeds £100,000. It had been proposed to have two levels for tapering with 50% of personal allowances tapered away where income exceeds £100,000 and the second half tapered away where income exceeds £140,000.
Income Tax Rates
These are as follows: -
| 2009/20010 | 2008/2009 | ||
| £0 - £37,400 | 20% | £0 - £34,800 | 20% |
| Above £37,400 | 40% | Above £34,800 | 40% |
A small 10% band is retained for savings income.
The combined effect of the increases in tax bands and personal allowances means that an individual will be able to receive gross income of £43,875 (2008/09 £40,835) before paying higher rate tax.
A new 50% tax rate of tax will be introduced from 6th April 2010 for individuals with income in excess of £150,000.
Capital Gains Tax (CGT)
The annual exemption has been increased by £500 to £10,100.
Inheritance Tax (IHT)
The nil rate band is now £325,000 (2008/09 £312,000).
National Insurance
The rates of Class I National Insurance applying from 6th April 2009 are as follows: -
| Annual Income | Employees NIC | Employers NIC |
| up to £5,715 | Nil | Nil |
| £5,716 - £43,875 | 11% | 12.8% |
| over £43,875 | 1% | 12.8% |
These rates will increase by 0.5% from 6th April 2011.
Value Added Tax (VAT)
The VAT registration and de-registration thresholds have been increased to £68,000 and £66,000, respectively.
The temporary reduction in the VAT rate from 17½% to 15% will end on 31st December 2009.
Investment
The investment limit for ISAs has been increased to £10,200 (of which £5,100 may be cash) for those over 50 from 6th October 2009. These increased levels will be available to all ISA investors from 6th April 2010.
Corporation Tax
There were no major changes, although the Chancellor confirmed that the small companies’ rate will be retained at 21% for the year commencing 1st April 2009. The bands set out below apply to a company which has no associates.
| Annual Profits | Tax Rate |
| £0 - £300,000 | 21% |
| £300,001 - £1,500,000 | 29.75% |
| over £1,500,000 | 28% |
Capital Allowances
For a 1-year period commencing 1st April 2009 (6th April 2009 for uncorporated businesses), a 40% First Year Allowance will be available for expenditure on general plant and machinery. In practice, this measure will only be of interest to large businesses as a 100% Initial Allowance is available for businesses investing up to £50,000 per annum in plant.
Carry Back of Trading Losses
The 12 month period commencing 24th November 2008 announced in the Pre Budget Report during which a business may carry back a trading loss for one year has been extended by a further 12 months.
Tax Relief on Pension Contributions
From 6th April 2011 individuals with taxable income of £150,000 or more will see their higher rate tax relief on contributions tapered away so that where taxable income exceeds £180,000 they will only be entitled to 20% relief on their contributions.
Complex provisions have been proposed to deny higher rate relief to high earning individuals who change the pattern of their contributions on or after 22nd April 2009.
Car Scrapping Scheme
The Government have put aside up to £300 million to encourage people to trade in old cars and buy new ones. Full details are not yet available but basically a £2,000 payment will be made available for anyone trading in a car over 10 years old against a new car between 1st May 2009 and 31st March 2010.
HMRC Charter
HMRC will be required to prepare and maintain a Charter which will set out standards of behaviour and values to which HMRC will aspire in dealing with taxpayers and others. This Charter must be in place by 31st December 2009.
Comment
In the coming months, in a series of articles, we will look at some of the threats and opportunities presented by this Budget.
Disclaimer
This document has been produced for general guidance only and does not constitute tax advice. Whilst every care has been taken in its preparation, Warr & Co will not accept liability for any loss incurred as a result of any use made from this document or its contents. We will be happy to offer specific advice to clients when requested. Should you have any queries or wish to discuss any of the points raised, please contact Peter Edwards.
Date of Article: 24th April 2009
