- Key Changes Announced Today in UK Emergency Budget
- July 1, 2010 | Authors: Sarah Challis; Helena Whitmore
- Law Firm: McGuireWoods LLP - London Office
The UK coalition government’s emergency Budget for 2010 has introduced some key changes that will affect taxpayers in the UK. An outline of the main changes announced today is below.
The tax-free personal allowance will increase by £1,000 from £6,475 to £7,475 from April 6, 2011. The higher rate income tax threshold of £37,400 will remain frozen until 2013/2014.
From midnight tonight, capital gains tax rates have increased for the higher rate and additional rate taxpayers from 18% to 28%, meaning it will still be significantly cheaper for high earners to accrue gains than income.
The 10% capital gains tax rate applying to those eligible for Entrepreneur’s Relief has been extended from the first £2 million of qualifying gains to £5 million, which will be good news for those who may qualify under the relief.
The link between the basic state pension and average earnings will be restored from 6 April 2011. There are also plans to freeze council tax from 6 April 2011. Public sector workers earning over £21,000 per year will have their pay frozen for the next two years.
As previously indicated, the Chancellor has confirmed in this Budget that there will be a review of the tax position of UK resident, non-domiciled individuals
New businesses outside London, the south-east and east of England will be exempt from £5,000 of national insurance contributions for each of the first 10 employees they hire. The employer national insurance weekly contributions threshold will increase by £21 above indexation from April 6, 2011.
The small companies' corporation tax rate will be cut to 20% next year. The main corporation tax will be cut by 1% per year for four years from next year, bringing it down to 24%.
From January 2011, a levy will be imposed on UK banks and the UK operations of foreign banks. It is set to be mirrored by the French and German governments. There is also a proposal in the Budget to take action on “unacceptable banker’s bonuses” although what action that may be has not been specified.
There is no planned increase in duty on fuel, tobacco and alcohol.
It has been announced that VAT will increase from 17.5% to 20% from January 4, 2011.
Early indications in world markets have shown the pound sterling has increased in strength against the euro and the U.S. dollar in response to the Budget.