EMERGENCY BUDGET UPDATE – JUNE 22nd 2010
Capital gains tax: CGT rates are expected to rise from the current rate of 18% so they are more in line with the current income tax level rates of 40% and 50%. The latest speculation is suggesting a rate of 30%.
It is likely that these changes will take effect on either 22 June or at the start of the next tax year on 6 April 2011.
The proposals suggest that gains on non-business assets are likely to be subject to a substantially higher rate of tax. The most common assets affected by these proposals will be second homes, rental properties and investment portfolios of shares or securities.
Relief from the higher rate of CGT is expected for entrepreneurial gains, as is currently the case, but the detail of which is currently unknown.
Action can be taken to mitigate the rise in the CGT rate but will have to be done so quickly. Please speak to us if you would like to discuss any planning issues.
Corporation tax: The pledge to make the UK a more attractive place to do business by reducing the corporation tax from a top rate of 28%, funded by changing the capital allowances available to businesses, is likely to go ahead but it is not clear to what rate it will be reduced.
VAT: It is widely anticipated that the VAT rate will rise from 17.5% to 20% as the UK standard rate is relatively low when compared to other EU countries.
Income tax: A key Lib Dem manifesto pledge was to raise the income tax threshold to £10,000 and the government have agreed to announce a "substantial increase" in the personal allowance from April 2011. Whether this will be applicable to all earners remains to be seen.
National insurance: The 1% rise in national insurance contributions from next April for employees is likely to go ahead but the same uplift for employers national insurance has been shelved.
