Leaving aside all the politics of the latest budget (described as the most important for decades) the following is a brief summary of the main aspects from the perspective of an Independent Financial Adviser.
Here goes then…
A big increase in ISA limits, a dramatic hike in income tax for the highest earners and a radical revision of macro-economic forecasts are probably the key points from today’s budget.
The Chancellor is billing it as targeted support for the economy while continuing sustained fiscal consolidation from 2010-11 when the government forecast the economy will be recovering and able to support a reduction in borrowing.
Here are the main points and some initial thoughts:
ISA limits increased
An increase in the annual investment limit for Individual Savings Accounts (ISAs) to £10,200, up to £5,100 of which can be saved in cash. This will make ISAs more attractive – tax free roll up and accessibility.
Income Tax increase for very highest earners
From April 2010, an additional rate of income tax of 50 per cent will apply to income over £150,000, and the income tax personal allowance will be restricted for those with income over £100,000. So a year earlier than originally announced and 50% not 45% with the announcement on personal allowances an extra sting in the tail.
Pensions
From April 2011, tax relief on pensions contributions will be restricted for those with incomes of £150,000 and over, and tapered down until it is 20 per cent. This means salary sacrifice becomes more attractive for high earners. Firstly, the rises in National Insurance announced in the Pre Budget Report are not being postponed. Secondly, using salary sacrifice to increase pensions and bring income levels below either the £150,000 or the £100,000 limit must now be an attractive feature of tax planning.
Read full schedule of tax and NI rates here
Business
The Chancellor announced he was extending the enhanced loss relief for an additional year and expanding HMRC’s Business Payment Support Service, increasing capital allowances for new investment to 40 per cent for one year, and establishing a £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance.
For one year the rate at which capital allowances can be claimed on plant and machinery will be increased from 20% to 40%. There will also be an extension for one further year to the ability to carry back trading losses against profits of the previous three years.
Homeowners and homebuyers
The Chancellor announced a £600 million funding package of measures to build more homes through unlocking sites currently sitting as dormant, and an extension of the stamp duty holiday for all houses costing up to £175,000 until the end of the year.
VAT
It was confirmed that the reduction in VAT to 15% would continue to the end of the year. The rate will return to 17.5% on 1 June 2010.
Alcohol and cigarettes
The Government targeted alcohol and cigarettes putting around 7p on a packet of cigarettes and 6p on a pint of beer.
Fuel
Fuel duty will increase by 2 pence per litre on 1 September 2009, and by 1 penny per litre in real terms each year from 2010 to 2013;
Car scrapping bounty
Car buyers will get a £2,000 bounty for scrapping vehicles more than 10 years old.
The environment
The government announced a range of measures to encourage energy efficiency and low-carbon growth.
One question before we close – what’s your perspective on the Budget? Is it really a Budget for Jobs as was announced in the video below? I’d be intrigued to hear your thoughts. You can also check out the Government’s own Treasury Budget Microsite here to help you make up your mind.
Hope this helps – and as ever if you need friendly help to further understand how the 2009 Budget will affect you and your finances going forward.
Call me on 0800 321 3508
Until next time…
