The Emergency Budget - what does it mean for you?
24 June 2010
Broadly speaking there’s some bad news for virtually all of us, but no great surprises.
Income tax:
Personal allowances increased by £1000 from April 2011 to £7,475, saving basic rate taxpayers up to £200 a year. However, starting point for 40% tax rate lowered by £1,500 at the same time, which will affect about 700,000people. You will start to pay 40% on all earnings above £42,375. However, allowing for inflation you would have expected the threshold to rise by £1,500, so the real reduction is around £2,500. The National Insurance threshold will rise by £21 next year,
Capital Gains Tax:
If you have significant investments, or more than one property, there’s some added pain - capital gains tax, currently 18%, will increase for higher earners to 28%. Low and middle-income savers will continue to pay 18%.
Corporation tax:
The news is not as bad as feared. From midnight there will be a top rate of 28%, payable where the total of an individual's gains and income exceeds the income tax basic rate threshold. This rate will fall by 1p in the pound a year for four consecutive years until it reaches 24%. Small companies’ tax is to be reduced 1% to 20% from April 2011.
VAT:
As widely expected the rate will increase to 20% from 17.5% on 4th of January 2011.
Public Sector Cuts & Benefits Reform:
Eligibility for Child Tax credits will be reduced for families with a household income of more than £40,000 from April next year. Child Benefit will also be frozen for the next three years.There will be a two year pay freeze for public sector workers. Public sector workers earning less than £21,000 are to be paid an £250 extra each year for two years.
Pension:
The basic state pension will be linked to earnings from April next year. State pensions are guaranteed to rise in line with earnings, prices or 2.5%, whichever is greatest. The Government will also accelerate the increase in state pension age to 66.
IR35 review:
There was no further news on the Government's welcome commitment to "review IR 35, as part of a wholesale review of all small business taxation, and seek to replace it with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self-employed, or restrict labour market flexibility."
Filed under: budget, CGT, corporation tax, income tax, IR35, pension, VAT