The Budget - 22 April 2009

If you are looking for information about the 2008 budget or the 2007 budget please use these links.

Alastair Darling delivered his second budget on April 22nd 2009. In recent years the government has announced tax changes well in advance, and many of the changes announced in the budget are not due to come into effect until April 2010 or later.  As the next general election must be held by 5 May 2010, this sounds rather like Mr Darling trying to set the next government's fiscal policy.

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.  A more detailed guide is available here as a pdf file, and this includes tables of tax rates, allowances etc.   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.

Income Tax

National Insurance

Savings

Corporation Tax

Capital Allowances

Inheritance Tax

Stamp Duty

Motoring

Income Tax

In November 2008 Mr Darling used the pre budget report to announce a new 45% tax rate for income over £150,000 commencing in April 2010.  This new rate was increased in Mr Darling's speech to 50%.

• A new 50% rate for income over £150,000 from April 2010
• The personal allowance for taxpayers with income over £100,000 will be phased out from April 2010
• Tax relief on pension contributions will be restricted to the basic rate of tax for taxpayers with incomes over £150,000 from April 2011.

National Insurance

In his Pre Budget Report in November 2008 Mr Darling announced the following changes to the National Insurance system from April 2011.

• ½ % increase in the rate paid by individuals to 11.5% for employees and 8.5% for the self employed.
• ½ % increase in the rate paid by employers.
• ½ % increase from 1% to 1.5% 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 from April 2010, or from October 2009 for people aged over 50.  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

Two changes were announced in the Pre Budget Report in November 2008.  

• The Corporation Tax rate for small companies was due to increase from 21% to 22% on 1 April 2009, and this change has been delayed until April 2010.
• Companies' losses (up to £50,000) made in a year ending between 24 November 2008 and 23 November 2009 could be carried back and set against profits of the preceeding three years, rather than one year as is normal.

In his budget Mr Darling announced a one year extention to the loss carry back provision so that up to £50,000 of losses made in a year ending between 24 November 2009 and 23 November 2010 can also be carried back for up to three years.  Losses must be relieved against profits from the most recent years first.

Capital Allowances

A 40% first year allowance was announced for purchases of plant and machinery between 1 April 2009 and 31 March 2010 (6 April 2009 and 5 April 2010 for individuals and partnerships).  This is for purchases exceeding the £50,000 Annual Investment Allowance.

Inheritance Tax

The nil rate band has increased from £312,000 to £325,000 as previously announced.

Stamp Duty

The stamp duty holiday on the purchase of properties up to a value of £175,000 has been extended to the end of December 2009.

Motoring

A £2,000 allowance was announced for people trading in cars more than 10 years old to buy a new car.  £1,000 of this comes from the government, and the other half comes from the car manufacturer.  It is possible this will restrict the amount of other discounts available at the showroom.  The scheme will finish in March 2010, or when 300,00 cars have been purchased through it.

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