By George it's the Emergency Budget 2010

George Osborne delivered his first Budget that many had been waiting for with much trepidation as we knew the measures to be announced were to be tough but fair and that all of us would be affected in some way. So what did the harbinger of doom declare?

IR35

A one sentenced statement right at the end of a Business Tax Highlights document said, “The Government remains committed to a review of IR35 and small business tax and will release further details shortly.” Probably no surprise that there was no major announcement as at least it indicates that some serious thought may be given to how best reform IR35. Keep an eye open therefore for an announcement in the autumn maybe?

Businesses

Corporation Tax Rates

For companies with profits below £300,000, corporation tax will be reduced from 21% to 20% for profits falling on and after 1st April 2011.

Larger companies with profits above the upper limit of £1.5M will see rates fall year-by-year up until 2014 as follows:

From 1st April 
2011:   27%
2012:   26%
2013:   25%
2014:   24%

Capital Allowances

The rates of writing down allowances for new and unrelieved expenditure on plant and machinery will be reduced as follows:

General rate; 20% to 18%
Special rate; 10% to 8%

These changes will take effect from 1st April 2012 (corporation tax) and 6th April 2012 (income tax).

The Annual Investment Allowance, that gives 100% tax relief to capital expenditure up to an annual maximum amount of £100,000 will see this limit reduced to £25,000 as from April 2012.

Personal Tax and National Insurance

Personal Allowance

For those aged under 65 the personal allowance will increase by £1,000 to £7,475 effective from 6th April 2011. Higher rate taxpayers will not however be allowed to benefit from this increase.

Class 1 NICs

The secondary threshold, which is the point at which employers start to pay Class 1 NIC is to be increased by £21 p.w from April 2011.

A three year scheme is to be announced that will exempt new businesses in targeted regions from up to £5,000 of Employers NICs for each of the first 10 employees hired in their first year of business. The scheme should be operative by September but any new businesses set up from 22nd June will qualify.

Furnished Holiday Lettings

The furnished holiday lettings (FHL) rules will not be withdrawn from 6th April 2010 (1st April 2010 for companies).

Since 22nd April 2009, HMRC has applied the current FHL rules toUK taxpayers with qualifying holiday lettings situated elsewhere in the European Economic Area. Such businesses can currently choose whether to be taxed under the FHL rules or under the normal rules for property businesses and these will continue to apply for the current tax year.

Capital Gains Tax

Rates

A new rate of 28% will be effective for gains arising on or after 23rd June 2010. This will apply to individuals, whose total income and gains after deductions exceed the upper limit of the basic rate tax band. For those individuals with income below the upper limit of the basic rate band, the rate will remain unchanged at 18%.

Entrepreneurs’ Relief

From 23rd June 2010, the lifetime limit that reduces gains on disposals of entrepreneurial businesses by individuals, is to be increased from £2M to £5M. This relief taxes certain qualifying gains at a rate of 10%.

VAT

The rate of VAT will increase from 17.5 to 20% as from 4th April 2011. As a consequence of this increase the Flat Rate Scheme (FRS) sector flat rates have also been recalculated to reflect the increase.

Tax Credits & Welfare Reform

From April 2011, families with household incomes above £40K will have their eligibility to tax credit reduced. Further changes are expected in 2012/13 with the aim of focusing tax credits on lower income families.

Landline Duty

The previously proposed landline duty of 50p that was to be effective from 1st October 2010 has now been abolished.