2010 Budget Update

Stamp Duty

The finance bill 2010, will introduce a temporary relief from Stamp Duty for first time buyers up to the value of £250,000. To clarify: all parties to the purchase must be first time buyers, and it must be as a main residence. A first time buyer has also been defined as someone who has never purchased a property before anywhere in the world.

The finance bill also introduces a new rate band of stamp duty on properties over £1 Million these will now have to pay 5%.

New Anti-avoidance legislation will also be introduced to target those who currently exploit the partnership rules to artificially reduce the duty payable on land transactions.

• First time buyers no stamp duty on purchase of main residence up to a value of £250,000
• 5% Stamp duty on property over £1 Million

Income tax & National Insurance

Confirmation of the incoming 1% increase in NI from April 2011.

Also confirmed those earning over £150,000 will pay additional 10% from 6^th April 2010, this increase will also apply to many trustees, personal allowances will be restricted for individuals earning over £100,000 from 6^th April 2010.

• Increase in higher rate tax to 42.5% for dividends and 50% for other income from 6^th April 2010 for those earning more than £150,000 and certain trusts.
• Those earning over £100,000 will lose part or all of there allowance in 2010/2011, a reduction of £1 for every £2 of income over the £100,000.
• Lower limit on NI will increase by £570 in April 2011.
• NI to increase by 1% from 2011/2012

Corporation Tax

Rate remains 21% from 1^st April 2010 to 31^st March 2011; the increase for companies with chargeable profits below £300,000 has been deferred again!

Inheritance Tax

Frozen at £325,00 (each or £650,00 for married couples) for 2010/2011 and the next 4 years – overriding planned increase to £350,000 as in the budget in 2006.

Pensions

• Tax relief for those earning over £150,000 will have their tax relief restricted.
• Those earning over £180,000 will be restricted to 20% tax relief
• The relief will be based on 1% withdrawn for every £1,000 of gross income above £150,000
• Life-time allowance of £1.8 Million and the annual allowance of £255,000 are frozen up to 2015/2016 tax years.

Life Assurance Policies

Deficiency relief.

A complex system whereby if you have in effect overpaid tax on any gain made by a life assurance contract, you are entitled to relief.

• New Anti-avoidance provision

Essentially, in certain circumstances you could over claim, this little loophole has been closed.

Investments

Venture Capital Trust Schemes and Enterprise Investment Schemes

The geographical scope of the schemes will be expanded from UK to include shares listed on any EU regulated market. In addition, the minimum holding of “eligible shares” within the VCT will increase from 30% to 70%, however, the definition will be expanded to allow VCT’s to include shares with preferential rights to dividends.

• May now comprise shares listed within the EEA
• Minimum Eligible shares up to 70%, and definition widened
• Qualifying trade relaxed to company must simply have a permanent establishment in UK

ISA’s

• Annual Allowance will increase with RPI from 6^th April 2011 (based on RPI for the September before the start of the tax year) the limit will be rounded to the nearest £120.
• The Cash allowance will remain at half the value of the Equity ISA limit after indexation.