Budget March 2010

It was inevitable that the March 2010 Budget would be political. It was also predictable that tax measures would be limited with an election looming.

We already knew that there would be a 50% income tax rate from 6 April 2010 and that people with taxable income in excess of £100,000 would see their personal tax allowance withdrawn by £1 for every £2 of income over £100,000. We also knew about changes to the pension contributions regime.

In the Chancellor’s speech today – and in the mass of documents released after he sat down – we learned:

• There will be no change to the headline rate of capital gains tax at this stage: it will remain at 18%.

• Capital gains tax Entrepreneurs’ Relief will be doubled, so that people disposing of the whole or part of a business, or of shares in a trading company that they own at least 5% of and of which they are a director, officer or employee will only suffer capital gains tax at 10% on the first £2,000,000 of gains.

• The inheritance tax exempt amount will remain at £325,000

• There will be no change to VAT rates. The taxable turnover threshold for VAT will increase from £68,000 to £70,000, from 1 April 2010. The deregistration limit will be increased from £66,000 to £68,000.

• First time buyers will benefit from the exemption of residential properties costing up to £250,000 from stamp duty land tax. This will be paid for by the introduction of a 5% rate of stamp duty land tax from April 2011.

• The Annual Investment Allowance for capital allowances on the acquisition of plant and equipment and on certain integral features in buildings will be doubled from 1st April for companies and 6th April for unincorporated businesses from £50,000 to £100,000.

• The temporary extension of trading loss carry back from one to three years for losses up to £50,000 continues for company losses arising in accounting periods ending between 24th November 2008 and 23rd November 2010.

• The temporary extension of trading loss carry-back from one to three years for losses up to £50,000 continues for the 2008/09 and 2009/10 tax years for unincorporated businesses.

Although the Chancellor was able to revise government borrowing predictions downwards the level of the UK’s borrowing remains very high and it is very likely that more – and unpalatable – tax measures will be announced in the year’s second Budget this summer.

UPDATE - See June 2010 Budget

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