Member Article

The Chancellor delivered the 2009 Budget on 22 April 2009. The following is a summary of the main points of interest.

Income tax

• From 6 April 2010 there will be an additional higher rate of 50 per cent on taxable income above £150,000.
• The basic personal allowance for income tax will be reduced by £1 for every £2 an individual's net income is above £100,000.
• An additional level of tax on dividends will be implemented to coincide with the new 50 per cent rate of tax.  Dividends that would otherwise be taxable at the 50 per cent rate will be taxable at a new 42.5 per cent dividend rate.
• The dividend trust rate will be increased from 32.5 per cent to 42.5 per cent and the trust rate will be increased from 40 per cent to 50 per cent.
• From 6 October 2009 the investment limit in individual savings accounts will rise from £7,200 to £10,200, of which £5,100 will be able to be saved in cash, for investors over 50. The changes will take effect for all investors in ISAs from 6 April 2010.

Pensions - From 6 April 2011 measures will be put in place to restrict to the basic rate of income tax, tax relief on pension contributions by people with taxable income of £150,000 or more. Legislation will also be introduced in the Finance Bill 2009 to prevent those who will be affected from seeking to forestall the changes by increasing their pension savings outside their normal pattern prior to the changes taking affect.

Interest relief on "close" companies - anti-avoidance - from 19 March 2009 interest payments made by individuals in relation to loans made to certain small businesses) close companies or partnerships) will not qualify for income tax relief against the individual's other income if the interest is paid as part of an arrangement that is certain to allow the investor to exit the arrangement with more money than was originally invested where that was the investor's main purpose in being party to the arrangement.

BUSINESS TAXES

Corporation tax - The main rate of corporation tax will remain at 28%. The small companies' rate will remain at 21%.

Capital Allowances

• Implementation of temporary 40 per cent first year allowance - this allowance will be introduced from 1 April 2009 for corporation tax and 6 April 2009 for income tax and will only be available for expenditure on plant and machinery in the general pool of assets that exceeds the limit for the Annual Investment Allowance (i.e. above £50,000).
• Modernising tax relief for business expenditure on cars - from the same dates as above qualifying expenditure on new cars purchased for business purposes will be allocated to one of two general plant and machinery pools depending on CO2 emissions.  Those cars with a higher CO2 rate (over 160g/km) will attract writing down allowances of 10 per cent.  Those with lower emissions will be added to the main rate pool and attract writing down allowances of 20 per cent per annum.
• Extension of the enhanced Capital Allowances schemes for energy saving and environmentally beneficial technology - the 100 per cent first year allowances schemes for "green technology" will be extended to include uninterruptible power supplies and air to water heat pumps and close control air conditioning systems.

Changes to company car tax - legislation will be implemented in the Finance Bill 2009 to set the rates for company car tax for 2010-11 and subsequent years and abolish the £80,000 price cap used to determine the cash equivalent of the car benefit charge from 2011-12. The legislation will have effect from 6 April 2011.

Extension of trading loss carry back for business - from 22 April 2009 for company accounting periods ending between 24 November 2008 and 23 November 2010 and for tax years 2008 -2009 and 2009-2010 for unincorporated businesses the period of time businesses will be able to carry back losses for tax purposes will be extended from one year to three years, with losses being carried back against later years first.  While the amount that can be carried back one year remains unlimited, a maximum of £50,000 will be available to carry back to each of the earlier two years.

 

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