The budget did not deliver wide ranging changes to businesses.A summary of the principal changes are noted below.
Capital Gains Tax: Increase in Lifetime Limit on Entrepreneurs’ Relief
Entrepreneurs’ Relief for gains arising from the material disposal of business assets by individuals was introduced by the Finance Act 2008. The relief is normally available in respect of gains made on the disposal of (1) all/part of a business, (2) assets following the cessation of a business and (3) shares in a company.
The relief reduces the rate of capital gains tax on the first £1 million of qualifying gains from to 10 % (gains above the limit are charged at the normal rate of 18%).
The Chancellor has announced that the limit on an individual’s qualifying capital gains will be doubled to £2 million.
The new limit will take effect for disposals on or after 6 April 2010. Small business owners looking to dispose of businesses will benefit from this change.
Corporation tax rates
The main rate of corporation tax remains unchanged at 28% for companies with profits of more than £1.5 million and at 30 per cent for companies with ring-fence profits.
The small companies’ rate of corporation tax which currently applies for all company profits below £300,000 will remain at 21%. Small companies’ rate for ring-fence profits will remain at 19%
Additional income tax rate and income-related reduction of personal allowance
The main rates of income tax will remain unchanged until April 2011. The 20% basic rate will apply to taxable income up to £37,400.The higher rate (40%) will apply to taxable income above £37,400.The 10% and 32.5% dividend ordinary and dividend upper rates will continue to apply to dividends otherwise taxable at the 20% basic and 40% higher rate respectively.
The new 50% additional rate of tax will apply (from 6 April 2010) to taxable income above £150,000.A new 42.5% dividend additional rate will apply to dividends otherwise taxable at the new 50% rate.
From 6 April 2010 the basic personal allowance for income tax will be reduced to nil for individuals with adjusted net incomes (income after losses, pensions and gift aid are accounted for) above £100,000. The amount of the allowance will be reduced by £1 for every £2 above this limit.
VAT registration and de-registration thresholds
From 1 April, the taxable turnover threshold, will be increased from £68,000 to £70,000 and the threshold for determining whether a person may apply for deregistration will be increased from £66,000 to £68,000.
Stamp duty land tax - residential
The nil-rate threshold for stamp duty land tax (SDLT) on residential property purchases for first-time buyers will increase from £125,000 to £250,000. The buyer must intend to occupy the property as their only or main home
The relief will only apply to purchases taking place between 24 March 2010 and 25 March 2012.
The Chancellor announced in his speech that this increase in the nil-rate threshold will be funded by the introduction of a higher SDLT rate of 5 per cent for purchases of residential property for more than £1 million. This increased rate will apply to purchases made on or after 6 April 2011.
