Entrepreneur’s lifetime limits are to be raised to £2m (from £1m) on which they will pay just 10% capital gains tax, instead of the main rate of 18%.
The government is to sign a new tax information exchange agreement with
The Chancellor has vowed that over the next year RBS and Lloyds will provide £94bn in new business loans, with half going to SMEs.
The time to pay scheme for business will be extended for the whole of the next parliament.
Business rate taxes for SMEs will be reduced for one year starting from October 2010. This will impact on 345,000 small businesses that may get a business rate tax holiday.
The inheritance tax threshold will be frozen for four years.
The stamp duty limit is doubled to £250,000 for first time buyers (effective from midnight 24/03/2010)
Since this is a budget announced before a General Election, some of these changes may be overturned after the election, but they stand for the moment.
Individuals
Increase in child element for those aged one and two
The Government is increasing the child element for those families with children aged one or two from April 2012 by £4 per week.
Tax credits - Fixed period childcare costs
From April 2010 awards for fixed period childcare costs (such as claims of a few weeks during the school holidays) will be averaged and paid over that fixed period rather than averaged over a year. This will enable families to receive all the financial support towards their childcare costs they are entitled to receive for these periods when they need it.
Working Tax Credit for the over 60s
From 6 April 2011, people aged 60 and over will qualify for Working Tax Credits if they work at least 16 hours a week.
Tax rates and thresholds
Budget 2010 confirms the Pre-Budget Report 2009 announcement of the Income Tax rates and Personal Allowances for 2010-11:
- the basic rate will remain at 20 per cent
- and higher rate will remain at 40 per cent
- the additional rate will be set at 50 per cent
- the basic rate limit will remain at £37,400
- the starting rate limit for savings will remain at £2,440
- the personal allowances will remain at their 2009-10 amounts
From 2010-11 the additional rate will apply to taxable income above £150,000.
From 2010-11 the amount of the Personal Allowance will be gradually withdrawn for all individuals (regardless of age) with adjusted net incomes above £100,000. The rate of reduction is £1 for every £2 above the income limit.
National Insurance contributions rates and thresholds
The following amounts announced in the PBR 2009 have been confirmed in the Budget 2010. All National Insurance contributions rates and thresholds are unchanged from the current year 2009-10.
Allowances and rates
The 2010/11 personal allowance will remain at the current level of £6,475. The basic rate limit will also be maintained at £37,400. Therefore an individual will start to be taxed at higher rates when their total income exceeds £43,875.
Capital Taxes
Capital gains tax (CGT) annual exemption
The annual exemption for 2010/11 is frozen at £10,100.
CGT rates of tax
For individuals and trustees capital gains continue to be charged at 18%.
Entrepreneurs’ Relief
The amount of an individual’s gains that can qualify for Entrepreneurs’ Relief are currently subject to a lifetime limit of £1 million. For trustees, the £1 million limit is that of the beneficiary of the settlement who meets the conditions for the trustees to claim the relief. Gains qualifying for the relief are charged at an effective rate of 10%.
This limit will be increased to £2 million for disposals on or after 6 April 2010.
Inheritance tax (IHT) nil rate band
As previously announced, the nil rate band for 2010/11 will be frozen at the current level of £325,000. This will now be extended to cover the tax years 2011/12 to 2014/15.
Stamp duty land tax (SDLT)
At present the SDLT rate is 1% for residential property purchases where the consideration is more than £125,000 and up to £250,000.
Legislation will be introduced in the Finance Bill to give relief from SDLT where the consideration is more than £125,000 but not more than £250,000. This relief will apply where the purchaser or all the purchasers are first time buyers and intend to occupy the property as their only or main home.
The new relief will be available for residential property purchases where the effective date (normally the date of completion) is on or after 25 March 2010 and before 25 March 2012.
The current highest SDLT rate of 4% applies to residential property purchases where the consideration exceeds £500,000. A new rate of 5% will be introduced for transactions in residential property where the consideration exceeds £1 million.
This new higher rate will apply where the effective date is on or after 6 April 2011.
VAT
VAT thresholds
The VAT registration limits increase with effect from 1 April 2010 as follows:
- the threshold for compulsory registration is £70,000
- The threshold for voluntary deregistration is £68,000.
Time to Pay
HMRC will continue to offer Time to Pay as part of its support for all viable businesses having difficulty in meeting their tax obligations. In addition, to ensure that all requests continue to be assessed on a consistent basis, businesses that need to use the service more than once will be directed to a specialist team.
Video games industry
The government has announced that, following consultation on design, it will introduce a tax relief for the
Business Tax
Corporation tax rates
The small companies corporation tax rate which applies to companies with up to £300,000 of profits is currently 21%. An increase to 22% is planned to take effect from 1 April 2011.
Capital allowances on plant and machinery
Most businesses are able to claim an Annual Investment Allowance (AIA) on the first £50,000 spent on most plant and machinery. This provides immediate 100% tax relief on qualifying expenditure.
The allowance is to increase to £100,000 from 1 April 2010 for a business within the charge to corporation tax and from 6 April 2010 for a business within the charge to income tax.
As the chargeable accounting periods of many businesses will span the operative date of change, a pro rata calculation of their maximum entitlement will be required.
Budget Summary and other issues
Economy
• The impact of the economic crisis has meant the
• Growth forecast for 2011 revised down to between 3% and 3.5%. Predicted growth of 1-1.25% in 2010 in line with forecasts
• Borrowing will be £11bn lower this year, at £167bn. It should be £163bn next year, £131bn in 2011-12 and £110bn in 2013-14. It will reach £74bn in 2014-15, £8bn lower than forecast in December
• The reduction in the deficit will go from 11.8% of GDP to 5.2%, more than halved over four years
Taxes
• Tax on bank bonuses raised £2bn in 2009-10, twice as much as forecast
• More systematic tax on banks is needed. It should be internationally co-coordinated
• Doubling of stamp duty allowance, from £125,000 to £250,000, funded by 5% stamp duty for properties worth more than £1m
• Inheritance tax threshold frozen for next four years
• Tax information agreements with
• Business rates cut for one year from October, so 345,000 businesses will pay no rates at all
• No further announcements on VAT, national insurance and income tax
Jobs
• For older workers, an extension of tax credits
• Length of time over-65s have to work to receive work credits is reduced
• For next two years, no one under 24 will need to be unemployed for longer than six months before being offered work or training
• Total of 15,000 civil servants relocated, including 1,000 Ministry of Justice posts moved out of
Drinks, cigarettes and fuel
• Duty on cider will increase by 10% above inflation from Sunday. Duty on beer, wine and spirits will increase as planned from midnight Sunday
• Tobacco duty will rise immediately by 1% above inflation this year, then 2%
• Increase in fuel duty to be staged. Fuel duty to rise by a penny in April followed by a further 1p rise in October and the remainder in January
Businesses
• RBS and Lloyds will provide £94bn in new business loans, nearly half to small and medium-sized businesses (SMEs), over next year
• A new credit adjudicator will fast-track complaints from smaller firms who say they have been unfairly denied credit
• Faster licensing process for new banks to boost competition
• Increase of 15% in the number of central government contracts going to SMEs
• A new national investment corporation, UK Finance For Growth, will streamline and improve government help to
SMEs
• New growth capital fund to provide capital for fast growing firms
• Investment allowance for small firms doubled to £100,000
Jobs
• A £2.5bn one-off growth package paid for by switching spending in some areas, with the extra proceeds from the tax on bank bonuses, announced last year
• Number of civil servants in
• Public-pay settlements will be held at a maximum of 1% for the two years from 2011
Education
• A £35m university enterprise capital fund to support university innovation and spin-off companies
• A £270m fund to create 20,000 university places in subjects such as science, maths, engineering
Banking and savings
• Everyone to have a basic bank account, bringing an extra million people into the banking system over next five years
• From next month the annual Isa limit to rise from £7,200 to £10,200 and Isa limits to increase annually
Defence
• Over £4bn next year for operations in
Infrastructure and environment
• £100m set aside for repairs to local roads, £285m for improvements to motorways
• A £2bn green investment bank, using £1bn of public cash matched with private funds
• £60m to develop ports hosting manufacturers of offshore wind turbines
Tax credits and allowances
• Parents of one- and two-year-old children to get an increase of £4 a week in child tax credit from 2012
• The pensioners' higher winter fuel payment of £250 and £400 for the over-80s, guaranteed for another year
Savings
• From October next year, the most expensive properties will be excluded from the housing benefit calculation in each area, which will, added to anti-fraud measures, save £250m a year
• Departments will publish details about how to achieve £11bn of new savings
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