The Budget - 24 March 2010

If you are looking for information about earlier budgets please use these links:

2009 budget, 2008 budget, 2007 budget

Alastair Darling delivered his third budget on 24 March 2010, the last budget before the general election which is widely expected on 6 May.  The Chancellor had little room to manouevre given his desire to win the election and  the poor state of the economy following the banking crisis.  Obviously bad news would have to wait until after the election.  Additionally the government's practice of announcing tax changes a year or two in advance further tied his hands.  The result was a speech with little or no substance, leaving this commentator wondering how it can take a hour to say so little.  This was a man with very little to say and a lot of time in which to say it.

With a general election looming there will be very little parliamentary time available to debate and enact the Finance Bill, so it is likely to be enacted after the election.  However if the election brings a change of government which parts will be enacted, and which parts destined to the scrapheap?  If this happens we have been promised second budget by 25 June (50 days after the election).

This report covers the main taxes and their effect on most people.  It is not intended to be a complete definitive guide to the budget.  All figures are approximate.  If you are looking for the definitive guide then you should try The Financial Times or one of the 'Big Four' accountancy firms. Alternatively you could try the official budget pages at HM Revenue and Customs or the government's summary on the DirectGov website.

The following tax changes have been announced as starting in April 2010 or later.  Some of these were announced in the 2010 budget, and some in earlier budgets or in pre budget statements.

Income Tax

National Insurance

Savings

Corporation Tax

Capital Allowances

Capital Gains Tax

Inheritance Tax

Stamp Duty

Motoring

Income Tax

The following income tax changes are effective from April 2010:

• A new 50% rate for income over £150,000
• The personal allowance for tax free income is frozen at £6,475.
• The higher rate tax threshold is frozen at £37,400.
• The personal allowance is reduced for taxpayers with income exceeding £100,000.  The allowance will reduce by £1 for every £2 of income over £100,000.  This has the effect of creating a 60% tax band between £100,000 and £112,950.

The following income tax changes are effective from April 2011:

• Tax relief on pension contributions will be restricted to the basic rate of tax for taxpayers with incomes over £130,000.

National Insurance

The following national insurance changes are effective from April 2011:

• 1% increase in the rate paid by individuals to 12% for employees and 9% for the self employed.
• 1% increase in the rate paid by employers.
• 1% increase from 1% to 2% in the rate paid on higher earnings (those in excess of £844 per week).

Savings

The annual limit on investing in Cash ISAs (Individual Savings Accounts) rises in April 2010 from £3,600 to £5,100.  Alastair Darling announced in his 2010 budget that this limit will be increased annually by the rate of inflation.  No tax is payable on interest earned in these accounts as long as the rules associated with the account are followed.  The amounts for non Cash ISAs are double these figures.

Corporation Tax

There are no changes to the Corporation Tax rates.  The promised increase in the small companies rate (for taxable profits of less than £150,000) from 21% to 22%, which was delayed as a result of the economic downturn, is still on hold.  

Losses made in a year ending between 24 November 2008 and 23 November 2010 can be carried back and set against profits of the three preceding years (most recent years first), rather than just one year as is normal.

Capital Allowances

The Annual Investment Allowance for the purchase of certain capital items was doubled from £50,000 to £100,000.

Capital Gains Tax

Entrepreneurs' relief was doubled so that the first £2 million of certain types of Capital Gain is taxed at a reduced rate.

Inheritance Tax

The Chancellor announced a freezing of the nil rate band for four years. 

Stamp Duty

Stamp duty is no longer payable on property costing up to £250,000 (previously £125,000).  To counter the loss to the exchequer the amount payable on properties costing in excess of £1 million has increased from 4% to 5%.

Motoring

The 3p per litre increase in petrol and diesel duty that was due to come into effect on 1 April has been changed.  This will now come into effect in three stages; 1p on 1 April, 1p on 1 October and the last 1p on 1 January 2011.

The Chancellor announced that fuel duty will increase by 2% above inflation for 2014-15.

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