2009 Budget announcements

Here is our summary of the tax announcements from yesterday’s Budget that are relevant to small businesses and contractors.

Income tax

• If you earn more than £100k, the personal allowance (currently worth £6,475) will be tapered down at the rate of £1 for every £2 of income in excess of £100k.
• From 6 Apr 2010 income tax will be 50% on income above £150k (42.5% for dividends).

Therefore if you have surplus funds in your company it may be an idea to take an extra dividend this tax year (i.e. before 6 Apr 2010). However, think twice about paying pension contributions to avoid the 50% tax rate as pension relief is tapered down to 20% for those earning more than £180k.

Business tax

• Company losses of up to £50k arising in periods ending in the two years before 23 Nov 2010 can be offset against profits of the previous 3 years.
• Losses arising in tax years 2008/09 and 2009/10 can be offset in a similar fashion for the self-employed or partnerships.

Savings

• ISA limits are increased to £10,200 (max £5,100 for cash sums) from 6 Apr 2010.
• If you are at least 50 yrs old on 6 Oct 2009 the above limits apply from this date.

Capital gains

• The annual exempt amount is £10,100 for gains crystallised in 2009/10.

Company cars purchased or leased from 1 Apr 2009

• The purchase cost of cars with Co2 emissions exceeding 160 get tax relief of just 10% pa.
• Cars with emissions of 110 or less get 100% relief in year one.
• All other cars form part of the general pool with relief at 20%.
• If a car is leased with Co2’s of more than 160 only 85% of the cost is tax deductible.
• The taxable benefit % for a given Co2 level is increasing slightly (again)

VAT

• The rate will revert to 17.5% on 1 Jan 2010.
• The registration threshold is increased to £68k from 1 May 2009.

Property

• Stamp duty exemption on houses up to £175k is extended to 31 Dec 2009.
• Tax relief against other income for losses from UK furnished holiday lets is temporarily extended to European properties (to avoid European discrimination charges).  Don’t get too excited however as from 6 Apr 2010 tax relief will be withdrawn for both UK and European properies.

Details of tax rates for 2009/10 can be found on the HMRC website.