Some thoughts and information about the Budget 2009
New Higher Rates of Tax
The new marginal rate of income tax of 50% applies to income over £150,000 starting from April 2010. This is above the planned increase of 45% and a year earlier! What has been less publicised is the progressive withdrawal of the tax free personal allowances by £1 for every £2 income exceeds £100,000. This means those earning between £100,000 and £112950 suffer a marginal rate of income tax of 60%.
Where possible it would seem sensible to advance income and pay tax now before 5 April 2010 at only (!) 40%. Or consider using a company to control the extraction of profit or maybe share options possibly taxed as capital gains at only 10-18%?
Further Extension of Carry Back of Trading Losses
The ability to carry back losses of up to £50,000 up to three years (instead of just one under the old rules) has been extended for unincorporated businesses to 23 November 2010 ie tax years 2008/09 to 2009/10. For limited companies the extension applies to those with accounting periods ending between 24 November 2008 and 23 November 2010.
Help with Time to Pay Taxes
The Business Payment Support Service http://www.hmrc.gov.uk/pbr2008/business-payment.htm has been instructed to accept “time to pay” arrangements in a wider range of circumstances. The advisers have been asked to take account of reasonable estimates of current year losses in pressing for previous years taxes.
Relief for Pension Contributions restricted at Higher Rates
From 6 April 2011 the relief for pension contributions for higher rate taxpayers earning above £150,000 will be restricted gradually so that those individuals with an annual income of £180,000 or more will effectively receive only a 20% tax deduction, the same as a basic rate tax payer. This may mean that some individuals will only receive relief at 20% but will later be taxed on their pension income at 50%.
Furnished Holiday Letting Relief to be abolished
The relief for loss making short term letting businesses will be abolished from 6 April 2010. These rules currently allow the offset of losses often made on holiday letting income against other taxable income subject to certain conditions.
However in the meantime HMRC does accept that it cannot discriminate as it did previously against individuals owning property in the EU – as opposed to in the UK. This means properties within the EEA area now qualify for relief until it’s general abolition in April 2010.
Budget Funny!
Some tweets below captured live on Wednesday from inside the Treasury (allegedly)
“ BUDGET CONSULTATION: Please tweet us your ideas for the Budget as Alistair has not got a clue. The final TwitBudget will be published here.
BUDGET2009. Treasury msg to HMRC: Sh+tting ourselves here, we haven't finished writing the Budget yet and Alistair has gone AWOL
Budget2009 update: Alistair has locked himself in the toilet and won't come out. Gordon has called in MetPolice to break down the door.
Budget2009: Back of fag packets currently being assembled into final document
#budget09 Alistair forgot to say "minus" before the growth forecast figures for 2010 and 2011. Next government's problem anyway “
Hat tip for that to http://twitter.com/HMRevenue
You can follow me on Twitter http://twitter.com/andrewcazalet
There is a good summary of the main general Budget provisions here
Please do get in touch if you have any questions or clarification. Feel free to pass this on if you know anyone who might be interested.