Budget 2010 [- Well, the first one..]

Alistair Darling’s Budget on Wednesday 24th March may well have been his last such presentation [regardless of which party actually wins the forthcoming general election] – and is just as likely to be merely the first ‘Budget’ this year: whoever is in power after May or June will almost certainly have another go at raising taxes and cutting state spending. With that in mind, these were the highlights from March:

VAT and Income Tax rates unchanged.

It was never very likely that the Chancellor would have stood up and announced any increases in ‘universal’ taxes at this time, and there were no surprises that both VAT and Income Tax rates have been left alone. This of course means that the 50p rate of tax announced last year comes into effect from April 2010, for taxable earnings of £150,000 and over. Other than this ‘additional rate’ all personal tax rates, bands and allowances remain unchanged for 2010/11; for those fortunate individuals who still look forward to pay rises, the absence of any ‘index-link’ between RPI and tax bands/allowances does mean that they’ll effectively be losing a little more of any increased pay than they might realise from the bland headline ‘tax rate unchanged’!

But VAT Registration thresholds amended.

The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.

National Insurance Rates unchanged.

No changes announced to any NIC rates for 2010/11 – all classes [employed, self-employed, employer’s and employee’s] remain as for 2009/10.

Corporation Tax Rates unchanged, but capital allowances are:

While the main rates of Corporation tax remain unchanged, there was a slight change to capital allowances. The Annual Investment Allowance (AIA) allows businesses, regardless of size, to reduce their taxable profits by the full amount of their annual capital expenditure on most plant and machinery (apart from cars), up to a maximum amount of £50,000 each year. The maximum amount of the AIA will increase to £100,000 from 1 April 2010 (for corporation tax) or 6 April 2010 (for income tax). Capital expenditure above this threshold will continue to be eligible for standard capital allowances against taxable profits. However, the “Temporary first year allowance” rate of 40% that was available in 2009/10 is removed for 2010/11.

Fuel duty – and politicians don’t think they’re ‘out of touch’!

Last year’s Budget announced that the main rate of fuel duty would increase by 1pence per litre in ‘real terms’ on 1 April 2010. In reality that would have been 2.76 pence per litre increase. In the 2010 Budget it was announced that this increase would be implemented in three stages: 1 penny per litre on 1 April 2010, 1 penny per litre on 1 October 2010, and 0.76 pence per litre on 1 January 2011. With the inevitable ‘add on’ from the oil majors, we’re expecting pump prices to be back to the disastrous levels of over £1.25/litre by the end of this year; it probably doesn’t even register with ministers chauffeured around in state limousines just how much that affects the public in general – or the impact on the forecourt trade in particular.

Drink anyone?

Maybe not, but an awful lot of forecourt shops now rely on the off-licence trade to make a contribution to keeping the site profitable. However no Chancellor would pass on an opportunity to raise duty on booze [social and medical reasons, you understand..] and this time it is Cider that takes the biggest hit. Duty rates for all still ciders, and sparkling cider exceeding 1.2 per cent alcohol by volume (abv) but not exceeding 5.5 per cent abv, were increased by 10 per cent above inflation. Duty rates for all other alcoholic drinks will increase by 2 per cent above inflation – every year until 2013.

How about a smoke then:

No, he couldn’t resist those either. The rates of Tobacco Products Duty (that is the duty on cigarettes, cigars, hand rolling tobacco, other smoking tobacco and chewing tobacco) were increased by 1% in ‘real terms’ [or around 9p a packet in really- ‘real terms’] with effect from 6pm on Budget day. The intention is to raise tobacco duty by 2% per year ‘in real terms’ every year until 2014.

Some relief – Business Rates:

Updated property values for business rates take effect from 1 April 2010 the ‘multiplier’ for 2010-11 is being reduced to compensate, so that total revenue from business rates remains the same in real terms. The 2010 Budget announced a temporary increase in the level of small business rate relief for one year, from 1 October 2010 –

Need help with paying the government?

The Business Payment Support Service (BPSS) – giving people streamlined access to request Time to Pay their tax – introduced at the 2008 Pre-Budget Report to support viable businesses experiencing temporary financial difficulty, is to continue. The service is available for all HMRC taxes, including VAT, Corporation Tax, Income Tax and NICs and PAYE. HMRC will require businesses seeking Time To Pay (TTP) arrangements for arrears of £1million or more, to provide an Independent Business Review (IBR) in support of their request. There will be no change for all other businesses. HMRC will continue through The Business Payment Support Service (BPSS) to provide help and support on the same principles as before. And those same principles will continue to apply to businesses with large debts.

Relief if you’re selling the business.

Entrepreneurs’ Relief was originally introduced on 6 April 2008. It allowed individuals in business [sole traders or partnerships] to claim relief on the first £1 million of gains made on the disposal of any of the following:

• all or part of a business
• the assets of a business after it has ceased
• shares in a company

Entrepreneurs’ Relief reduces the amount of gains liable to Capital Gains Tax by four-ninths o Entrepreneurs’ Relief reduces the amount of gains liable to Capital Gains Tax by four-ninths on all qualifying gains up to £1 million. You can make claims on more than one occasion as long as the total of all your claims doesn’t exceed £1 million of qualifying gains.

If you’ve really had enough, the good news is that from April 2010 the limit for relief has doubled to £2 million.