Budget 2009

With the recession predicted to be the worst since 1945, it was bound to be a difficult budget, aimed at improving the state of the country and helping us to move out of the recession.

Alistair Darling has given us a budget which has aimed to tax those with higher earnings, and increased public spending and borrowing

Main announcements from the budget:

Personal tax

There will be a new 50% tax rate for individuals earning over £150,000 from 6 April 2010.

Those earning over £100,000 will gradually lose their personal allowance.

Similar increases will be made to trusts and dividend trust rates.

Furnished holiday letting losses will no longer be available for offset against other income after 6 April 2011.

The ISA limits will be increasing immediately for people over 50 years old and everyone else from 6 April 2010 to £10,200 per tax year, of which £5,100 may be in a cash ISA.

Pensions

Pension tax relief will be limited for those with incomes of over £150,000 to give relief only at basic rate from 6 April 2011.

In order to ensure that people do not take advantage of the current rates now, there will be some transitional rules.

The transitional rules will limit higher rate tax relief on pension contributions where they have an income in excess of £150,000 and pension savings in excess of £20,000, who change their normal regular pension savings.

Basic state pension will increase by at least 2.5%

Winter fuel payments will increase by £100 for over 80’s and £50 for over 60’s.

Business

The business payment support service announced in November has been extended to allow businesses that are normally viable but likely to make losses in the current year to take account of the expected losses when agreeing payment levels.

An extension of loss relief was announced in November to allow losses to be carried back to earlier periods; this has been extended for another year.

Corporation tax rates are to remain unchanged at 28% and 21% for the small company’s rate.

A new first year allowance has been introduced for 12 months from 1 April 2009 for Companies and 6 April 2009 for all other businesses. The new rate is 40% for the general plant and machinery pool.

Car scrapping scheme

From next month cars over 10 years old can be traded in for new vehicles for £2,000 discount.

This will run until March 2010.

This could be used effectively with the current capital allowances offered for low emission cars. 100% allowances are offered on cars under 110g/km emissions.

A full list of the current qualifying cars can be found at Comcar

VAT

The current registration threshold is to increase from £67,000 to £68,000.

VAT changes to modernise cross border trading will be introduced over a 3 year period from January 2010.

The VAT rate of 15% will continue to 31 December 2009. After this date it will revert to the previous rate of 17.5%.

Excise duties

Excise on alcohol will increase by 2% from midnight tomorrow.

Excise on tobacco is to increase by 2% from 6pm today

Fuel excise will increase by 2p per litre from September 2009.

Stamp duty land tax

In order to support the housing market the stamp duty holiday announced in November has been extended to 31 December 2009.

The holiday applies to acquisitions of residential properties under £175,000 where the SDLT will be 0%. After 31 December 2009 it will revert to acquisitions of properties under £125,000.