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Emergency Budget 2010

Budget highlights from today's emergency budget from the coalition

  • VAT will increase to 20% as of 4 January 2011
  • Tax credits cut for family incomes over £40,000
  • Small company corporation tax will be reduced from 21% to 20% next year
  • Capital Gains Tax for higher rate tax payers will be increased to 28% from midnight tonight
  • Capital Gains relief for entrepreneurs of 10% to be increased to first £5m
  • No change in tobacco, alcohol and fuel duties but the planned increased in duty on cider has been cancelled
  • Landline tax has also been scrapped to be funded by alternative means
  • Personal Allowances to be increased next year by £1000 to £7475. This will take 880,000 out of the tax system. No increase in the higher rate income tax threshold though
  • Basic state pension will be re-linked with state-earning from next April
  • Child benefit to be frozen for three years
  • ... and the Treasury's Euro Preparations Unit has also been dissolved and team members reassigned to other duties

And a few specific details from this emergency budget

  • IR35 - The budget did not mention any changes to IR35. However, budget documents confirm that the government want to undertake a comprehensive review of small business taxation to make the need for IR35 redundant.
  • National Insurance changes have been left almost unchanged, with a 1% increase for both employers and employeers. Employees will now 12% on earnings up to the higher rate threshold. Employers will now pay 13.8%. However the threshold when it starts has been increased by £21 per week. Lets ignore the additional relief for new businesses outside London and South East.
  • Entrepreneur's tax relief will be increased from £2m to £5m in 2011. But this relief if a life time limit and cannot be used for every business disposal. If you have already been granted entrepreneur's relief, the lifetime limit will be reduced accordingly.
  • Flat rate VAT scheme rates will increase on 4 Jan 2011. The current 13% rate will increase to 14.5% and the current 12.5% rate will increase to 14%.
  • Tax relief for the video games industry has been scrapped along with the landline tax for the extension of broadband.
  • Although personal allowances will be increased by £1000 next April, the government have also said that they will adjust the basic rate top rate (the point at which you pay the higher rate) down to negate the increase for all higher rate tax payers. This implies that higher rate tax will become payable at £42,875 instead of the current £43,875.
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