As part of our on-going commitment to keeping Willis Owen investors informed, here is a quick summary of the Chancellor’s 2010 budget.
ISA Allowance
The ISA allowance for the 2010/11 tax year is £10,200, of which up to £5100 can be in cash. This means that this tax year you and your spouse / civil partner can invest over £20,000, knowing that any income will be free from personal income tax and any capital gains made will be tax free too.
In future tax years, the annual ISA allowance will be raised in line with inflation measured using the Retail Prices Index (RPI). If the RPI falls, the ISA allowance will remain unchanged.
Income Tax
The Personal Income Tax allowances for 2010/11 have been frozen at 2009/10 rates. Those people earning over £100,000 will lose part or all of their personal allowances in 2010/11, based on a reduction of £1 for every £2 of income in excess of £100,000.
The Income Tax Rate bands have also been frozen for 2010/11, however, the Chancellor has introduced an additional rate of 50% for those whose taxable income is more than £150,000. There is also an increase in higher rate tax to 42½ % on dividend income.
Capital Gains Tax
The annual exemption amount for Capital Gains Tax for individuals is frozen too at the 2009/10 level of £10,100.
The rate of Capital Gains Tax for 2010/11 for individuals is held at 18%.
The Chancellor did announce a change in the Entrepreneurs’ Relief. From 2010/11, this relief has doubled and is now available for up to £2 million of “lifetime gains” on the sale to trading businesses, delivering an effective 10% rate.
Inheritance Tax
The nil rate band for Inheritance Tax is frozen at £325,000 for the next 4 years, up to and including 2014/15. Tax is payable at 40% on the excess above this figure.
National Insurance
The Chancellor had already announced a 1% increase and he confirmed this rise for 2011/12 tax year.
Corporation Tax
Both the main rate and the rate for small companies (those with profits of less than £300,000) are held at 28% and 21% respectively.
Stamp Duty and Land Tax (SDLT)
A new rate of 5% is to be introduced for purchases of residential property that exceed £1 million for completion on or after 6 April 2011.
First time buyers of residential property up to £250,000, who are to occupy the property as their new main home, will receive temporary relief from SDLT. This is applicable for all completions on or after 25 Marc h 2010 and before 25 March 2012.
None of the information above is intended to be a personal recommendation, however, if you have any queries or want an audit on you and your family’s finances, why not speak to a financial adviser.