There were a number of key tax announcements in yesterday’s Budget 2010 speech. Here’s a brief summary:
Income tax and national insurance contributions
The Chancellor did not make any new announcements on either income tax or national insurance.
However, a new 50% tax rate on income above £150,000 a year comes into effect next month.
Despite a great deal of rumour and speculation, Alistair Darling opted to leave VAT at current levels.
Great news for first-time property buyers with the doubling of the stamp duty allowance, from £125,000 to £250,000, albeit only for two years.
Less good news for people owning properties worth more than £1 million: from April 2011 they must pay stamp duty at a rate of 5% – an increase of 1% – to fund the stamp duty holiday for first-time buyers.
Working tax credit
Older workers over 60 will soon only have to work 16 hours a week to qualify for Working Tax Credit. At the moment they need to work for at least 30 hours a week to qualify…
The government has also changed the childcare element of the Working Tax Credit to make it more responsive to the needs of parents. This will allow parents with short-term childcare needs to receive larger payments when they need them, such as during the school holidays, rather than getting a smaller, average payment over the course of the year as is currently the case.
Child Tax Credit
Starting April 2012, Child Tax Credit will increase £4 a week for each child aged one and two.
Inheritance tax (IHT)
The Chancellor froze the IHT threshold (the level at which you’ll need to pay tax) at £325,000 until 2014.
Capital gains tax (CGT)
The main CGT rate will remain at 18%.
But the threshold at which small businesses pay CGT will increase to £2 million.
For a rundown of the main announcements affecting businesses – including increases in the annual investment allowance and landfill tax, and cuts in business rates and company car tax on fuel efficient vehicles – visit HM Revenue & Customs website.
Starting April 2011 how much pension tax relief you get will depend on how much more than £130,000 you earn. If, for example, you earn £180,000 or more per year, you will only get 20% tax back on your pension contributions. Visit HM Revenue & Customs website for more information.
Note also that as of next month the annual ISA limit will increase from £7,200 to £10,200.
Alcohol and tobacco duties
Duty on cider will increase by 10% above inflation from Sunday and duty on beer, wine and spirits will increase as planned at 2% above inflation each year until 2015.
Tobacco duty will rise immediately by 1% above inflation this year, then 2% in real terms each year until 2014.
The previously announced increase in fuel duty for 2010 will now be staggered. The duty will rise by 1p per litre on 1 April, 1p per litre on 1 October, and then 0.76p per litre on 1 January 2011.
The Chancellor also took his Budget 2010 speech as an opportunity to announce tax information sharing agreements with the low tax jurisdictions of Dominica, Grenada and Michael Ashcroft’s backyard Belize.
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