Emergency Budget - The Predictions
17 June 10
The following are predicitions of how the Emergency Budget on 22nd June 2010 could affect you and your business:
Rise in tax-free allowance - the Government has indicated that they intend to raise the personal tax-free allowance which currently stands at £6,475 to £10,000 over the lifetime of this Parliament. It is likely that in the first instance the allowance will rise between £700 - £1,000.
National Insurance Rise - A 1% rise in National Insurance Contributions is likely to kick in next April.
VAT Rise - There is speculation of an increase in VAT.
Corporation Tax - it has been announced that the headline rate of corporation tax will be reduced however there has, at present, been no indication as to the rate it may be reduced to.
Pensions - The Coalition Government has agreed to restore the link between the basic state pension and earnings. There is a likelihood that further pension reliefs will be taken away from high income earners, perhaps lowering the proposed threshold for tapering of higher rate relief which is set at £150,000 of income. The Government could go further and implement other reforms such as increasing the state retirement age for men and women.
Inheritance Tax (IHT) - there is unlikely to be any change to the current IHT threshold of £325,000. However, there may be changes to some restrictions to IHT including the rules for non-domiciled individuals.
Capital Gains Tax (CGT) increase - the actual rate is yet to be determined but it is thought that there will be an increase in order to bring CGT in line with income tax, indicating it could go up (from 18%) to approximately 40%, leading to owners of second homes, share portfolios and other investments facing substantially higher CGT bills. It is predicted that this increase will begin at the start of April 2011. The increase is to be on non-business activities only, however there has been some discussion as to what is classed as ‘business’ and ‘non-business’. The Emergency Budget may also introduce changes to Private Residence Relief which enables people to sell their only or main residence free of CGT.
For more information on any of these issues, please email Nia Wharry or Tel: 01256 320 555.

