Overview

Concerns that this Pre Budget Report would be the starting point of several years of pain were largely unfounded as the Chancellor delivered a Pre Budget Report that announced very few new proposals in relation to tax. There may or may not be a Budget delivered before the next election but it seems certain that subsequent Budgets will contain significant tax increases. As always, EQ Taxation will keep you informed of any changes arising.

Tax partner, David Morrison, commented “the changes announced were nowhere near as radical as had been anticipated and in particular, the decision to leave capital gains tax unaffected was a major surprise. None of the measures announced will alter our budget deficit position radically and therefore we can expect some further adverse taxation announcements over the next few years. My advice would be to consider your current tax position now given the difficult financial times we expect to face”.

Set out below are a summary of the main tax measures affecting businesses and individuals:-

For businesses

• The Business Payment Support Service scheme has been extended to continue to allow taxpayers with cash flow difficulties to spread their tax payments over a period agreed with HMRC. The small companies rate of corporation tax was expected to go up to 22% with effect from 1 April 2010. The rate, however, will not be changed from that date and will remain at 21%.

• A “patent box” was announced which means that income from patents in the UK will be taxed at only 10% with effect from April 2013. This is designed to incentivise investment in innovative industries.

• R&D Tax Credits change to remove the requirement that any intellectual property deriving from the research undertaken be owned by the company making the claim. The change applies to any expenditure incurred in an accounting period ending on or after 9 December 2009.

• Fuel benefits to rise with effect from 6 April 2010 and changes to the CO2 emission levels for car benefits with effect from 6 April 2012.

• From 1 January 2010, the standard rate of VAT increases to 17.5%, with a corresponding change to the flat rate scheme percentages from that date also.

For individuals

• The inheritance tax threshold will remain frozen at £325,000 for individuals and £650,000 for married couples and civil partners for 2010/11.

• Capital gains tax annual exemptions are also unchanged for 2010/11 at £10,100 for individuals (£5,050 for most trustees).

• From 6 April 2011, all NIC rates to rise. From this date the rates will be : -

  
  - Employee Class 1 - 12%
  - Employer Class 1 and Class 1A/B - 13.8%
  - Self employed Class 4 - 9%
  - Class 1 and 4 additional rate - 2%
   

• No change to capital gains tax rates.

• With effect from 6 April 2010, significant reliefs removed for those with furnished holiday letting income. From that date, furnished holiday letting income will be treated in the same way as other property income.

• The SDLT holiday for houses costing up to £175,000 will end on 31 December 2009 with the threshold reverting to £125,000 (£150,000 for disadvantaged areas).

In addition, the announcements made in the Budget 2009 regarding the new 50% rate of income tax for those earning more than £150,000 in 2010/11 were confirmed, along with the personal allowances restrictions for those earning over £100,000. Similarly, the rules relating to restricting relief on pension contributions were also confirmed.

At EQ Taxation, we will be delighted to discuss any of the above changes and how they might affect you and your business. Please contact any of our specialists either by telephone or email as per the details below:-

David Morrison 01382 312100 david.morrison@eqaccountants.co.uk
Lyndsey Orrock 01307 474274 lyndsey.orrock@eqaccountants.co.uk
Iain Gordon 01307 474274 iain.gordon@eqaccountants.co.uk
John Langlands 01382 312100 john.langlands@eqaccountants.co.uk
Alan Tucker 01307 474274 alan.tucker@eqaccountants.co.uk
John Hogg 01738 637937 john.hogg@eqaccountants.co.uk