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Emergency Budget 2010: How it will affect you

by Access Legal

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There are a number of tax issues thrown up by the Emergency Budget on 22 June that will affect you. Here we look at the key ones, and at how they're likely to have an impact.

Personal taxes

Capital Gains Tax – from 23 June 2010, a new rate of CGT at 28% will be introduced for individuals whose total taxable gains and income exceed the upper limit of the basic rate income tax band (currently £37,400). For trustees and personal representatives, the rate is also increased to 28%. The annual allowance remains unchanged (currently £10,100 pa).

Income Tax – from 6 April 2011, the personal allowance will be increased by £1,000 to £7,475. The basic rate limit will be reduced by £1,000 so that higher rate taxpayers do not benefit from this increased allowance. The basic rate limit will be frozen until 2013-14.

National Insurance – to keep income tax and National Insurance limits aligned, the upper earnings limit will be reduced.

Pensions annual allowance – the Government has announced that, from 6 April 2011, it is considering restricting pensions tax relief by reducing the annual allowance to somewhere in the region of £30,000 to £45,000. This would replace the high income excess relief charge due to come into force on that date.

Non-domiciled individuals – in line with a statement in the Government's Coalition Agreement, the taxation of non-domiciled individuals is to be reviewed.

Furnished holiday lettings – the FHL rules will not now be withdrawn from April 2010. The Government will consult over the summer about plans to change the regime from April 2011.

ISAs – as announced by the previous government, from 6 April 2011, the ISA limits will be indexed in line with the Retail Price Index.

Landline Duty – the duty of 50p-per-month announced by the previous government on all land-lines will be abolished.

Council Tax – council tax will be frozen in 2011-12.

Property

Stamp Duty Land Tax – the Government will review the SDLT relief for first time buyers looking at its affordability and value for money. In addition, the Government will examine whether changes are needed to the SDLT rules on high value property transactions to prevent tax avoidance.

UK Real Estate Investment Trusts – UK REITs will now be allowed to issue stock dividends in lieu of cash dividends in order to meet the requirement that 90% of their profits from their property rental business are distributed. Again this will be legislated for in a Finance Bill after the summer recess.

VAT

Standard rate – the standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. Anti-forestalling legislation will be introduced to prevent artificial arrangements which seek to take advantage of the change in the standard rate.

Tax administration

Collection of tax – HMRC will use debt collection agencies to collect £140m of additional tax revenue from existing tax debtors.

General anti-avoidance rule – the Government will look at whether there is a case for developing a general anti-avoidance rule.

Disclosure regime – the Government will consult on bringing inheritance tax on trusts into the Disclosure of Tax Avoidance Schemes regime.

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