Tax rates
The Chancellor announced that there is to be no change to the rate of capital gains tax, corporation tax or VAT. Previously announced increases to income tax and national insurance will proceed as planned.
Baker Tilly analysis
One of the main talking points ahead of this Budget was the possibility of an increase in capital gains tax rate and VAT. This has not happened and rates remain 18% and 17.5% respectively.
Prior to this Budget, the Chancellor had announced that the top rate of income tax would rise to 50% for high earners from April 2010 and that national insurance contribution rates would rise by 1% from April 2011. These have both been confirmed, although the Chancellor did mention that those earning under £20,000 per annum would not be affected by the increase in national insurance.
In detail
The rate of capital gains tax for 2009/2010 was 18%. There was a fear that this would increase for 2010/2011, but this has not happened. The rate remains at 18% and will remain at an effective rate of 10% for disposals qualifying for entrepreneurs’ relief, although the lifetime gains that qualify for this lower effective rate have been doubled to £2 million from April 2010.
There was speculation that the rate of VAT would also increase. However, the Chancellor has announced that the rate would remain unchanged.
The Pre-Budget Report in December announced a top rate of income tax of 50% from April 2010 for those with taxable incomes over £150,000 per annum and also a phasing out of the personal allowance for those with taxable incomes over £100,000. Both of these changes have been confirmed in this Budget. Also confirmed is the restriction in higher rate tax relief for pension contributions for individuals with relevant income above £130,000 from April 2011.
The Chancellor also confirmed that the planned 1% increase in national insurance contributions for employers, employees and the self-employed will go ahead as planned from April 2011. However, he did stipulate that individuals earning less than £20,000 would not be affected by this increase.
Small business rate relief is to be increased temporarily for one year from October. Eligible small businesses occupying properties with rateable values up to £6000 will pay no rates and those from the rate relief taper (rateable values up to £12,000) will receive significant reductions.
The Time to Pay arrangement is a facility that has been of use to many businesses in the past 18 months and the Chancellor has announced that it will remain in place at least for the life of the next parliament.