Financial Monitor (December 2009)

Pre Budget Report 2009

Income Tax Rates and Allowances

The income tax rates will be the same in 2010/11 as 2009/10 with the addition of the 50% rate which will apply to income in excess of £150,000.

Income tax allowances and thresholds have been frozen at 2009/10 levels although the personal income tax allowance is gradually removed for those earning over £100,000. These allowances are normally linked to the change in the RPI and, as this has fallen, keeping them at the same level is in fact a benefit to taxpayers in real terms.

Capital Gains Tax

There was no mention of capital gains tax rates and the annual exemption in the PBR. Should we assume that the 18% rate has been retained or could we see a change in the Budget?

National Insurance Contribution Rates

There will be a further 0.5% increase to add to that already announced to be effective from April 2011.

The rates for 2011/12 will then be:

Employees on earnings between the primary threshold ( currently £110 per week) and the upper earnings threshold (currently £844 per week)	12% (11%)
Employees on earnings above the upper earnings threshold	2% (1%)
Employers on earnings above the primary threshold	13.8% (12.8%)
Self employed on profits between the lower profit limit (currently £5,715) and the upper profits limit (currently £43,875)	9% (8%)
Self employed on profits above the upper profits limit	2% (1%)

The rates and thresholds will remain unchanged for 2010/11 except the lower earnings limit is increased from £95 to £97 per week. Pay below this level will not provide access to state pensions or other contributory benefits.

In 2011/12 the level at which earners start to pay national insurance contributions will increase so that those earning less than £20,000 will pay less contributions overall, so protecting those on lower earnings from the increases.

Corporation Tax

The main rate will remain at 28% and the planned increase in the small companies rate from 21% to 22% has again been deferred a further year.

VAT

The standard rate of VAT will return to 17½% on 1 January 2010. We have not yet been notified of any increases in the registration or deregistration thresholds.

Inheritance Tax

The planned increase in the nil rate band from £325,000 to £350,000 from April 2010 has been cancelled.

Company Car and Van Benefits

A new lower 10% car benefit band will be introduced from 6 April 2012 for company cars with CO2 emissions below 100g/km. The bands will increase by 1% for every 5g/km emissions above the 10% band.

The company car and van benefit for electric vehicles will be reduced to nil from 6 April 2010 for five years. There will therefore be no tax paid by the employee on such benefits nor any Class 1A national insurance paid by the employer.

From 6 April 2010 the fuel benefit charge multiplier for calculating the benefit of fuel provided in cars to employees for private use will increase from £16,900 to £18,000. This figure is then multiplied by the appropriate CO2 band percentage calculated for the car used by the employee.

The fixed charge for private fuel provided in company vans will increase from 6 April 2010 to £550 (previously £500).

Pension Contributions

The anti-forestalling legislation introduced to prevent those earning over £150,000 (who will see pension relief restricted from April 2011), making additional contributions in 2009/10 and 2010/11, has been changed. From 8 December 2009, those with income above £130,000 will have pension relief restricted where they have changed their established pattern of pension contributions. Due to the “look back” rules anybody with income of £130,000 or more in any of the tax years 2007/08 to 2010/11 will potentially be within the anti-forestalling legislation.

From 5 April 2011 pension relief will be restricted as follows:

Those with income before pension contribution and charitable donations of less than £130,000 will not be affected.
Those with income between £130,000 and £150,000 will only have tax relief on pension contributions reduced if contributions made by their employer on their behalf when added to their income takes them above £150,000.
Those with gross income (ie. including employer pension contributions) of between £150,000 and £180,000 will obtain pension contributions tax relief of between 20% and their marginal rate on a tapered basis.
Those with gross income of £180,000 or more will receive basic rate relief (20%) only on pension contributions.

HMRC are continuing to consult on the details of the scheme and in particular how employees will be assessed under self assessment when contributions are paid by the employer.

Capital Allowances

There will be a new 100% rate of capital allowances for the purchase of new unused electric vans from April 2010.

Empty Property Rate Relief

Empty properties with a rateable value of less than £18,000 will continue to be exempt from business rates for 2010/11.

Tackling Offshore Tax Evasion

HM Revenue and Customs propose to:

introduce a new penalty regime for those who do not disclose income or gains linked to offshore accounts or assets. Penalties could be up to 200% of the tax due.
require holders of some overseas bank accounts to formally notify HMRC and impose penalties where this is not done.
actively pursue those who do not take advantage of the current disclosure facility and ensure they are subject to significant penalties.

The new penalty regime will be effective from 1 April 2011. The regime will be intended to cover both income and gains realised from offshore assets and the transfer of assets outside the UK with the intention of evading tax. Non-domiciled individuals paying tax on the remittance basis will not be affected.

The disclosure requirement for offshore accounts will require disclosure of accounts in specific high-risk jurisdictions, or in some other jurisdictions where the balance on the account is greater than £25,000. The disclosure will need to be made within 60 days of opening the account.

Christmas Greetings

The team at UHY Wingfield Slater wish you a very Happy Christmas and a Prosperous New Year. Our offices will be closed on 24, 25 and 28 December 2009 and 1 January 2010.

Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken.

UHY Wingfield Slater
Wellington House, 39 Wellington Street, Sheffield S1 1XB
Tel: 0114 275 1544 Facsimile: 0114 275 1366 Email: info@uhy-wingfieldslater.com Web Site: www.uhy-wingfieldslater.com
Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales

A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms.

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