Budget Summary April 2009

A "momentous budget" - perhaps, but may be more for the events surrounding it, than for the contents. The budget and more importantly, the wider context will have immense consequences which are more appropriately considered at individual planning meetings. However, here is a brief summary of budget measures together with their impact and our view where relevant.

Personal Taxes

  • New top income tax rate of 50% introduced from April 2010 for those with earnings of £150,000 or more.
  • 42.5% tax rate on dividends.
  • Personal allowance reduced or eliminated for those earning over £100,000.
  • The Capital Gains Tax annual exemption increased to £10,100.

Investwise's comment: Consider transferring income or gains to reduce tax and ensure maximise investment into any tax sheltered investments. Year ending April will be the last where income above £150,000 can be taken at the current 40% top rate.

Inheritance Tax

The IHT nil rate band has been increased to £325,000. The rates of IHT will remain the same. No changes are proposed to any of the IHT exemptions currently available.

Stamp Duty

The stamp duty holiday on properties sold for less than £175,000 will be extended until the end of this year.

Investwise's comment : A valuable benefit, and certainly if you are looking to buy at property in the region of £175,000, sound motivation to complete the process sooner rather than later. It is not in itself a sufficient reason to enter into a purchase you would no have otherwise been making.

Savings

ISA limit increased to £10,200 a year from 6 October 2009 for over 50s - from April 2010 for everyone else.Cash element increased to £5,100.

Investwise's comment: The increase to the cash component of ISAs may particularly encourage those who are nervous about investing in stocks and shares. Expect offers to emerge over the next 6/12 months as providers compete for new money.

The basic state pension is to increase by 2.5%, regardless of the Retail Rice Index.

Pensions tax relief restricted for those earning over £150,000

  • Basic rate relief only from April 2010 for those earnings £180,000 or more
  • Tapered rate of relief for those earning £150,000-£180,000
  • Immediate special annual allowance of £20,000 for those earning £150,000 or more.

Investwise's comment: Pensions remain one of the most cost effective ways of investing for the long term, even with tax relief limited to "20%" for income over £180.000. Those affected, should consider taking full advantage of the capped allowance in tax year 09/10.

Business

The Chancellor is extending help allowing loss-making companies to reclaim taxes on profits made in the last three years to November 2010. 

Please note, the information provided does not constitute advice. You should contact us to arrange a financial review should you require any further information. 23/04/2008.