to the end of the tax year!

Budget 2010

Small Business Highlights


    Standard rate of VAT to rise from 17.5% to 20% from 4 January 2010. Whilst this is a significant increase, the UK’s VAT rate is still below the EU average


    Small company rate of corporation tax to be reduced by 1% to 20% from April 2011 (this is a reversal from the previously planned increase to 22% from next April)


    The Annual Investment Allowance (the amount of capital expenditure per annum a business can get 100% tax relief for) which was raised to £100,000 in April will, with effect from April 2010, fall to just £25,000. This is disappointing for business which invest more than £25,000 per annum but still means 95% of businesses get full tax relief in the year of expenditure


    Capital Gains Tax for higher rate taxpayers to rise to 28% from midnight last night (22 June). For basic rate taxpayers, the rate of CGT remains 18%. However Entrepreneurs’ Relief will still create an effective rate on business gains of just 10%. Furthermore the lifetime allowance for gains on which this rate is applicable is increased from £2M to £5M


    The planned 1% increase in National Insurance rates, on both employers and employees, will still come into force, however it was announced there will be an increase in the basic NI threshold of £21 per week. Those earning up to £20,000 will effectively be protected from the increase. A 3 year scheme was also announced to encourage new businesses outside of London and the South East, to exempt them from up to £5,000 of Class 1 employers NIC for each of their first 10 employees, in their first year of business Personal tax highlights


    Personal tax allowance for people aged under 65 to rise by £1,000 to £7,475 from April 2011, but will still taper down for those earning more than £100,000 and gone completely for those earning more than £113,000


    Higher rate income tax threshold to remain frozen until 2012/2013


    Revisions to the income tax relief for pension contributions is to be subject to consultation, however, the Chancellor indicated that he is considering a simpler system based on an annual maximum tax deductible pension contribution of between £30,000 and £45,000.


The above is a very brief overview of some of the issues relevant to small businesses arising from the government’s emergency budget on 22 June 2010. No action should be taken without consulting the relevant legislation or seeking professional advice. A C Grace and Company Limited accept no liability for any losses incurred whatsoever by any persons or corporate body acting or refraining from acting as a result of the material contained in this summary.


For any additional Information contact David Toner - Contact us here