Emergency Budget 2010

Below is a summary of the Budget changes relevant to small UK businesses and their owners.

Corporation tax

• Small company rate to reduce to 20% from April 2011
• Main company rate to fall to 27% from April 2011 followed by 1% annual reductions over the next 3 years to reach 24% by April 2014

VAT

• Standard rate of VAT to increase to 20% from 4 Jan 2011
• Sectoral rates for the Flat Rate scheme will increase at the same time as published here

Capital gains tax

• Annual exemption of £10,100 is unchanged
• Tax rate for basic rate payers remains at 18%
• Tax rate for higher rate taxpayers increases to 28% from midnight 22 June 2010
• 10% rate for entrepreneurs extended to £5m of gains in lifetime

Income tax

• £1,000 increase in Personal Allowance for tax to £7,475 with effect from April 2011
• However, the higher tax/NI rates will kick in sooner to offset the Personal Allowance increase for higher earners

National Insurance

• As previoulsy announced, NI rates will increase by 1% from April 2011
• The threshold at which NI becomes payable for employers will increase to £131 per week from April 2011
• Small businesses, in certain areas, set up over the next 3 years will be exempt from the first £5k of employer’s NI on up to 10 employees’ wages

Capital expenditure

• The maximum expenditure for immediate tax relief is reduced from £100k to £25k pa with effect from April 2012
• Other expenditure attracts reduced tax relief of 18% or 8% (previously 20% and 10%) for accounting periods ending April 2012 onwards

Furnished holiday lets

• No changes immediately so the generous tax reliefs continue for UK and EEA properties
• However, the government has announced a tightening of the rules from April 20011 - more details will be published in due course