Items from the Emergency Budget - 22nd June 2010

Items from the Emergency Budget - 22nd June 2010

Items from the Emergency Budget - 22nd June 2010

Here's a summary of the main points in the emergency budget:
 

Scrapping of the age 75 rule

  • The Government will scrap compulsory annuitisation from April 2011 and will introduce transitional measures for those who have not secured a retirement income and reach age 75 in the meantime.
  • Pending implementation of the necessary changes, legislation will be introduced in Finance Bill 2010 to increase to 77 the age by which members of registered pension schemes have to buy an annuity or otherwise secure a pension income.
  • This change will also apply for the purposes of inheritance tax charges that specifically apply to pension scheme members aged 75 and over.
  • A consultation on the detail of the proposal will ensue shortly.

Pension tax relief rules

  • Osborne says he will work with the pensions industry to find an alternative to the reduction of pension tax relief for higher earners from April 2011 as long as the £3.5bn revenue is still achieved.
  • The Budget documents suggest a reduced annual allowance of between £30,000 and £45,000 would achieve the necessary tax take. Further review with the industry will occur. 

State pension age increase accelerated

  • The Government will look to accelerate the increase in state pension age to 66 years. Interim Sept 2010 report awaited.

Lasting Health for Pensioners

  • Restore the earnings link to Basic State Pension from April 2011 and offer a triple guarantee of earnings/ prices or 2.5% per annum each year thereafter, whichever is the greater.

Capital Gains Tax (CGT)

  • The Government is increasing the rate of capital gains tax to 28 per cent for higher rate income tax payers from midnight on the 22nd June 2010.
  • The annual CGT exemption allowance of £10,100 will remain unchanged this year but will rise with inflation in future years.
  • Investors paying the basic rate of income tax will continue to pay CGT at 18 per cent.
  • Trustees’ rate will increase to 28%.
  • Entrepreneurs’ relief continues at 10% but allowable lifetime gains increased to £5M.

VAT

  • VAT is to be raised from 17.5 to 20 per cent in January 4, 2011.
  • A number of items will remain exempt from VAT such as food and children’s clothes, despite reports that it was going to be dropped.

Income Tax/National Insurance

  • Personal allowance will be increased by £1,000 to £7,475 in April 2011.
  • Basic rate limit will reduce to take account of the increased personal allowance.
  • Long term plan to increase the personal allowance to £10,000.
  • Upper earnings threshold will reduce to maintain link with basic rate income tax limit.
  • Employer’s start to pay Class 1 NI on increased income of additional £21 pw over inflation.

Bank Levy

  • The UK banking sector is to be hit with an annual £2bn bank levy from January 2011.
  • All banks, building societies and non-UK banks operating in the country will be taxed with a new bank levy.
  • The smallest banks and building societies will not be affected by the levy. The levy will also be reduced for those banks holding more tier 1 capital and longer dated debts.

Corporation tax to fall to 24%

  • The rate of corporation tax is to fall from its current level of 28p in the pound to 24p in the pound by 2014.
  • Corporation tax will fall by 1 per cent every year for the next four years, with the first cut to happen next year to 27p in the pound.
  • Small companies rate 20% from 2011.

Welfare System & Tax Credits

  • Child benefit will be frozen for 3 years
  • The ‘Help in Pregnancy’ loans will be abolished
  • The ‘baby’ element of the Child Tax Credit will be removed from 2012
  • Medical assessments will be brought in for those claiming Disability Living Allowance from 2013
  • Housing benefits will be reset and restricted appropriately, £280 per week for a 2 bedroom home, £400 per week for 4 bedrooms. 
  • Benefits / tax credits will be uprated in line with CPI rather than RPI.

Public Sector Workers

  • A 2 year pay freeze will be introduced
  • There will be protection however for those earning less than £21,000 (equating to 28% of the workforce).
  • Those with protection will still enjoy a flat increase of £250 for each of these years.
  • Public sector heads will have pay limited to no more than 20 x lowest paid worker.
  • A review will be undertaken as to how to limit the soaring costs of public sector pensions.

Community Charge Freezes

  • The Government will assist councils in order to try to facilitate council tax freezes from April 2011. 

Miscellaneous

  • Pre planned price increases to cider to be scrapped
  • Pre planned tax relief for the video gaming industry in to be scrapped
  • Pre planned tax land lines is to be scrapped
  • Pre planned upgrades and transport works for Tyne & Wear, Leeds and Liverpool rail links will be honoured.
  • The Civil List remains pegged at £7.9 million.
  • No further increases on duty on alcohol, tobacco or fuel
  • Any new businesses set up outside London & South of England will receive reductions in NI for the first 10 employees.

For more info, click here:

http://www.hmrc.gov.uk/budget2010/index.htm
http://news.bbc.co.uk/1/hi/politics/10374475.stm

Image courtesy: Flickr - used for editorial purposes only.

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