The 2010 Emergency Coalition Budget

Thanks to Tom WIlliams of Humphrey & Co and member of ASPD for the following outline of the budget:

The new Chancellor, George Osborne, delivered his first budget to the House of Commons on June 22nd, giving the first details of his ‘once-in-a-generation’ re-examination of the way government works. The aim was to tackle Britain’s record deficit of £155bn, through a rebalancing of the tax system so the better-off will pay more. This article focuses only on the main taxation provisions which may affect dentists and is by no means exhaustive.

VAT
The standard rate of VAT will rise by 2.5% to 20% from 4 January 2011. (Essential items which are zero rated, such as most food, children’s clothing, newspapers and magazines are not affected)

Income tax rates and allowances
The income tax rates for 2011-12 have remained unchanged. The annual personal allowance for individuals under 65 has increased by £1,000 to £7,475 from 6 April 2011.

Corporation tax rates
The small companies rate has been cut by 1% to 20% from 1 April 2011. The main rate will reduce by 1% to 27% from 1 April 2011, and by a further 1% each year to reach 24% by 2014/15.

National Insurance rates
From April 2011, the threshold at which employers start to pay National Insurance for their employees will rise by £21 per week, above indexation. Those setting up new businesses outside London, the South East and the East of England will be exempt from £5,000 of employer’s National Insurance payments for the first 10 employees.

Pensions
The basic state pension will be linked to earnings from April 2011, with the new ‘triple lock’ on the value of the increase – being the higher of earnings, prices or 2.5%. The government will also accelerate the increase in the state pension age to 66.

Capital Allowances
The annual investment allowance (where 100% of the capital expenditure is be allowed against business profits) rose to £100,000 in 2010/11, but will be slashed to £25,000 from April 2011 for all businesses. Writing down allowances (for expenditure in excess of this allowance or for assets which do not qualify) will be reduced from 20% per annum to 18%.

Capital Gains Tax
The ‘entrepreneurs relief’ rate of 10% for business owners who sell their businesses will not change, and the lifetime allowance for entrepreneurs relief will be extended to the first £5,000,000 of gains from April 2011. Capital gains tax on the sale of other assets will remain at 18% for taxpayers who only pay tax at the basic rate. Those who are liable to tax at the higher (or additional) rate will suffer capital gains tax at 28%. The annual allowance of £10,100 is unchanged, but will rise annually in line with inflation.

Cigarettes and Alcohol
No changes have been announced, however Labour’s plan to increase the duty on cider by 10% above inflation will be scrapped from July.