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Budget 2009 Overview

24th April 2009

Yesterday the Chancellor, Alistair Darling, presented his much anticipated budget speech report. Having acknowledged the depth of the recession, he hinted that the Budget measures would enable the UK economy to begin to grow 'by the end of the year'. Only time will tell how optimistic this estimate will be.

The 2009 Budget has included a number of amendments and proposals to be introduced over the next year or two. In order to plan your finances effectively it’s a good idea to familiarise yourself with the most important changes that were announced. Our summary focuses on the issues likely to affect you, your family and your business.

Top income tax rate increased to 50% from April 2010

• Applies to those earning £150,000 or over
• 42.5% rate on dividends where earnings exceed £150,000
• Highest rates also apply to trusts
• Personal allowance reduced or eliminated for those earning over £100,000
• It will apply to all types of earnings

ISA limit increased to £10,200 a year

• From 6 October 2009 for over-50s, of which £5,100 can be invested in a cash ISA.
• From 6 April 2010 for everyone else

*Only £7,200 in total and £3,600 in the cash component can be invested before 6 October 2009

Capital Gains Tax

This remains at 18%, or 10% for those qualifying for Entrepeneurs Relief.

Pensions tax relief restricted for those earning over £150,000

• Basic rate relief only from April 2010 for those earnings £180,000 or over
• Tapered rate of relief for those earning £150,000-£180,000
• Immediate special annual allowance of £20,000 with no restriction for those earning £150,000 and over
• Any regular ongoing pension contributions in place as at 22/04/09 will also not be restricted, whatever their value

To prevent very high earners from making substantial contributions before April 2011, there will be a ‘special annual allowance’ of £20,000 for those who have earned over £150,000 in the 2011-12 tax year or either of the two preceding ones.

Increased capital allowances

If you run a business and invest in business assets in excess of the £50,000 annual investment allowance, you'll qualify for the 40% tax relief (rather than 20% under the previous system).

Other interesting points

• Names of deliberate tax defaulters will be published where default was tax in excess of £25,000. This applies to individuals and companies.
• Enhanced relief for trading losses extended by a further year, allowing losses to be carried back against profits of 3 prior years.

Navigating through these uncertain times can be daunting. It is important to remember that tax planning is an ongoing process and should not be left until the last minute. We have the experience and contractor know-how to help you to reassess your plans regularly, and adapt them as circumstances change. Before implementing any changes that may affect your financial and tax affairs we would encourage you to contact us for professional advice on 020 7324 6020.

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