Mr Darling presented his long awaited second Budget yesterday afternoon against the backdrop of a deepening worldwide recession.
The downturn has been hurting us all for some time now and yesterday’s Budget has been much anticipated, with everyone keen to learn how Mr Darling and his colleagues at the Treasury hope to help UK businesses and individuals weather the economic storm.
Amongst the various initiatives announced in his speech were several relating to taxation. Labour appears to have gone back to its roots to an extent, as from next April the top 1% of earners will be asked to pay in a lot more to the Treasury’s dwindling coffers, with several hikes announced in the Pre-Budget Report (‘PBR’) in November being increased and brought forward.
There is some help for businesses, especially small businesses, in the form of increased capital allowances, a further extension to loss carry-back claims and the continuing Business Payment Support Service. However, rather than encouraging employment by reducing employer costs the Chancellor has instead opted to increase investment in government agencies whose job it is to assist the unemployed in getting new jobs.
- A new higher rate band of 50% on incomes over £150,000, with effect from April 2010 (at the PBR it was announced that the rate would be 45% and would not come into effect until April 2011, so this measure has been both increased and accelerated).
- A new higher dividend rate of 42.5% on gross dividend income over £150,000 (an equivalent rate of just over 36.1% on the net cash dividend – a large increase on the existing effective rate of 25%).
- Personal pension contribution relief will be restricted to 20% for those earning over £150,000 from April 2011, with measures being implemented immediately to prevent the ‘abnormal’ acceleration of pension contributions paid from budget day.
- A 40% First Year Allowance on plant and machinery will be available for expenditure incurred in the 12 months to 31 March 2010. In practice, this will be for expenditure not already relieved under the Annual Investment Allowance which is available on the first £50,000 of expenditure on plant and machinery.
- The temporary three year carry back of losses announced at the PBR in November is to be extended to apply to losses generated in accounting periods ending between 24 November 2008 and 23 November 2010. Losses of up to £50,000 in each of the two accounting periods may be carried back more than 12 months.
A few other measures outlined in the documents supplementing the Chancellors speech include the introduction of penalties for late payment of corporation tax and PAYE from April 2010, a new Revenue power to ‘name and shame’ deliberate tax defaulters and increased legal obligations on large companies to ensure that their accounting systems are adequate for the purposes of accurate tax reporting.
For a full analysis and detailed commentary of Budget 2009 please click on the following link:
http://www.bdo.uk.com/services/tax-services/budget-2009.html
If you require further information as to how the Budget affects you please contact us.
As the Chancellor was keen to stress in his speech, the United Kingdom is suffering as a result of a global economic downturn, and other countries are also struggling to increase tax revenues. Mr Darling’s counterpart in Ireland, Brian Lenihan, announced some tough new taxation measures in the Irish Supplementary Budget at the beginning of the month, which may affect those with cross-border interests.
Measures announced included the doubling of the rates of the new Income Levy, which came into effect from 1 January 2009. Health Levy rates were also doubled, with increases to both levies to take effect from 1 May 2009.
The rates of capital gains tax and capital acquisitions tax were increased from 22% to 25%, with immediate effect, while the special 20% rate for profits from residential development land was abolished with retrospective effect to 1 January 2009.
Income tax deducted at source from deposit interest has also been increased, from 23% to 25%.
The combined effect of the increases to the income and health levies takes the top rate of tax for the self employed up from 49.5% to 55%, ignoring tax credits and allowances.
In an attempt to protect and increase inward investment the low corporate tax rate of 12.5% has been retained, while a new tax relief for capital expenditure incurred on the acquisition of Intellectual Property is to be introduced.
If you think you may be affected by the Irish Supplementary Budget and would like more information please contact us.
We will hold our annual Budget Breakfast on 21st May in the Lagan Suite of the Hilton Hotel. The breakfast seminar will consider the impact of the budget on:
- The Northern Irish economy
- Business owners and executives
- Property developers and investors
- Banks, lawyers and key investors
Presentations will be given by our Tax and Wealth Management and Business Recovery experts, and by well known economist Mike Smyth.
For further information or to request an invitation, please contact Donna Hand at donna.hand@bdo.co.uk or on 02890 439009.
http://www.bdoni.com/news/newsletters.asp
Alternatively you can contact Donna Hand on 028 9043 9009 or email donna.hand@bdo.co.uk
please do not hesitate to contact us.
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| Peter Burnside Head of Tax peter.burnside@bdo.co.uk |
Frank McCartan Consultant frank.mccartan@bdo.co.uk |
Carol Malcolmson Managing Director carol.malcolmson@bdo.co.uk |
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| Maybeth Shaw Tax Partner maybeth.shaw@bdo.co.uk |
Aileen Paterson Personal Tax Director aileen.paterson@bdo.co.uk |
Peter Wood Senior VAT Manager peter.wood@bdo.co.uk |
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| Sean Lavery Tax Partner sean.lavery@bdo.co.uk |
Marie Mallon Personal Tax Director marie.mallon@bdo.co.uk |
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| Alex Ward Wealth Management Partner alex.ward@bdo.co.uk |
Paul McCourt Corporate Tax Director paul.mccourt@bdo.co.uk |
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