In his last Pre-Budget Report before the general election, Alistair Darling tried to balance two competing requirements:
- The need to demonstrate his financial prudence to the investment markets; and
- The continuation of the fiscal stimulus that he believes is necessary for UK economic growth.
If there is a change of Government after the election, some of the announcements in the PBR may be revised or dropped. However, given the Conservative Party’s forceful views on the urgency of reducing the Government deficit, many of the tax raising measures might well survive.
The main announcements were as follows:
- The increase in the small companies’ rate of corporation tax to 22% will be deferred for another year until 1 April 2011.
- All NIC rates will rise by a further 0.5% from April 2011 for employers, employees and the self-employed.
- The basic state pension will be increased by 2.5% in April 2010, despite the 1.4% fall in the RPI in the 12 months to September 2009. Certain other benefits and tax credits will rise by 1.5%.
- The draft rules for limiting higher rate pension contributions tax relief from April 2011 have been published. There are several important changes, including a cut in the income threshold to £130,000.
- The rules that currently limit pension contributions tax relief (‘anti-forestalling’) have been changed with immediate effect; the revisions include a new income threshold of £130,000.
- The personal tax allowance and the threshold at which 40% tax is charged will remain unchanged for 2010/11.
- Taxpayers who open offshore bank accounts in certain jurisdictions will be required to report them to HMRC. A range of anti-tax avoidance measures have been announced with immediate effect.
- There is to be a temporary bank payroll tax of 50% where banks, building societies and certain other financial businesses provide a bonus of over £25,000 to an employee. This will take effect from 9 December 2009.
© 9 December 2009. This summary is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this summary. The summary represents our understanding of the law and HM Revenue and Customs practice as at 9 December 2009, which are subject to change. These proposals may be changed in the Spring 2010 Budget and subsequent legislation, or at any time.
The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme.Last Updated