The changes announced in the 2009 Budget Report will have very little impact on contractors, however here are some of the main points to note:
Corporation Tax
- As announced at the 2008 Pre-Budget Report, the planned increase in the small companies’ rate of corporation tax is being deferred for one year; and the rate will remain at 21 per cent for the financial year 2009-10.
Personal Tax
- As announced in the Pre-budget report it was confirmed that the Basic rate limit £37400 for 2009/10 will remain in 2010/11. This means that including the personal allowance the higher rate tax will only be paid on incomes over £43875
- Income tax for those earning more than £150,000 to rise to 50% from April 2010.
- Tax relief on pensions to be reduced for people on more than £150,000 a year from April 2011
- Those earning more than £100,000 a year are to lose their personal tax allowance from April 2010. This will be taken at the rate of £1 for every £2 earned over £100,000.
Income Shifting
- As announced in the Pre-Budget report it was confirmed that action on Income shifting was deferred and no legislation would be included in the finance bill. However the Government has said this will be kept under review.
VAT
- It was confirmed that the VAT rate will return to 17.5% from 1 January 2010.
Cigarettes, Alcohol and Fuel
- Alcohol and tobacco duties to go up by 2%. Equivalent to 1p on a pint of beer and 7p on a pack of 20 cigarettes
- Fuel duty to rise by 2p per litre from September and then by 1p a litre above indexation every April for the next four years
Savings
- Tax-free ISAs annual limit to rise to £10200 for over 50s this year and for everyone else next year. Of that £5100 can be saved in cash.
Benefits
- Child tax credit to rise by £20 by 2010.
Car Scrappage Scheme
- From May until March 2010 motorists can get £2000 discount on new cars if they trade in a car more than 10 years old. They have to have owned the vehicle for 12 months. £1000 to come from the government with the rest from the motor Industry.
Pensions
- The basic state pension will be increased by at least 2.5% regardless of inflation.