EMERGENCY BUDGET JUNE 2010.

SALIENT POINTS affecting my clientele

2010/11 ( current )income tax rates and allowances are :

10% starting rate for savings income only. If non-savings taxable income exceeds £ 2440, this rate does not apply to savings income.

20% Basic rate ( 10% on dividends ) £ 0- £ 37400
40% Higher rate ( 32.5% on dividends ) £ 37401 - £ 150000
50% Additional rate ( 42.5% on dividends ) Over £ 150000

Class 4 NIC 8% of self employment income £ 5715 to £43875 pa. 1% over £ 43875.

Allowances :

Basic personal allowance £ 6475
Reduced by 50% of income over £ 100000
Age 65 to 74 £ 9490
Age 75 and over £ 9640
Married/ civil partner @10% where one partner born before 6 April 1935 £ 6965 : reduced by 50% of income over £ 22900

For 2011/12 the basic personal allowance rises to 7475, but the limit decreases to £ 35400 so that higher rate tax payers do not benefit.

The basic rate will then be frozen in 2013/14 if the coalition lasts that long !

NIC rates increase by 1% ( including the rise to 13.8% for employer contributions ) from 6 April 2011.
New businesses set up after 23 June 2010 outside London, East Anglia & the South East will not have to pay the first £ 5000 of class 1 employer Nic due in the first 12 months , on each of the first 10 employees in the first year of business.

TAX CREDITS reduce from April 2011.
ISA limits increase in line with inflation.
Government contributions to CHILD TRUST FUNDS reduce to £50 from 1 August 2010, and cease completely on 01/01/11.
PENSION TAX RELIEF will be restricted for higher rate tax payers.

FURNISHED HOLIDAY LETTINGS. Plans to repeal the furnished holiday letting provisions have been scrapped.
However, there is a view to changing the existing tax treatment from 6 April 2011 : probably by increasing the number of commercially available /let days needed in order to benefit from the favourable tax treatment, and changes to the way loss relief is given.

CORPORATION TAX
From 1 April 2010 profits below £300000 21%
" over £ M 1.5 28%
Marginal rate 29.75%
From 1 April 2011 Profits below £300000 20%
" over £ M 1.5 27%
Marginal Rate 28.75%

In future years there will be further cuts, possibly moving to a single rate of 20% for all companies.

CAPITAL ALLOWANCES
From 6 April 2012 Annual investment Allowance reduces from £ 100000 to £ 25000
Also from April 2012, general pool allowances reduce from 20% to 18%, and on cars emitting less than 160g/km from 10% to 8%

The government remains committed to a review of IR35 and small business tax and " will release further details shortly "

CAPITAL GAINS TAX
From 23 June 2010 CGT remains at 18% where total income AND chargeable gains are less than the upper limit of the income tax basic rate band. Gains or parts of gains above that limit are taxed at 28%

The annual exemption remains at £ 10100.
Entrpreneur's relief increases from £ M 2 to £ M 5. at 10%. The four ninths rule is abolished.

Thus dates are crucial when considering gains in 2010/11 as different rules apply before and after 23 June.

VAT

The Standard rate of VAT rises to 20% on 4 January 2011.
There are anti-forestalling provisions to prevent work being "prepaid ". Flat rate scheme rates are all adjusted accordingly.