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Emergency Budget 2010 - 'Tough but fair' measures unveiled by Chancellor
Carlisle based firm of chartered accountants Lamont Pridmore is advising clients to pay close attention to the Emergency Budget and its implications for businesses across the UK.
The Budget, the first under the Conservative-Liberal Democrat coalition and coming just six weeks after the General Election, was described as ‘tough but fair’ by its author, Chancellor George Osborne, as he unveiled the biggest package of spending cuts and tax increases in a generation.
One of the key features of the Budget, which The Chancellor says is designed to reduce Britain’s deficit, include a new rate of Capital Gains Tax of 28% where total taxable gains and income are higher than the basic rate tax band of £37,400. Gains below this level will continue to be taxed at 18%. The annual capital gains exemption has been frozen at £10,100.
Meanwhile, entrepreneurs’ relief on Capital Gains Tax will be extended from £2 million to the first £5 million of lifetime gains.
The other key feature of the Budget is the hike in VAT from 17.5% to 20% from January 4th 2011.
The threshold at which employers start to pay National Insurance contributions will also rise by £21 a week from April 2011. Corporation Tax will be cut by 1% each year for four years until it reaches 24%, while small businesses’ tax will be cut to 20%.
There is also a boost for new start-ups, with anyone setting up a business outside London, the south east and the east of England will be exempt from £5,000 of National Insurance contributions for each of their first 10 employees.
Other points worth noting include a £1,000 increase in personal income tax allowance of £1,000 to £7,475 from April next year, giving basic taxpayers an extra £170 per year. The basic rate band will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance.
There is also a predicted growth for the UK economy of 1.2% in the next year, increasing to 2.3% the following year, 2.8% in 2012 and 2.9% in 2013, with a slight decline to 2.7% in both 2014 and 2015.
Graham Lamont, partner at Lamont Pridmore, said: “While we were expecting the tough measures outlined by the Chancellor, the new Budget certainly brings good news for smaller businesses with a cut in their tax.
“The National Insurance tax break for people starting businesses outside of London, the south east and east of England should also act as a good incentive for people still deciding whether to take the plunge and set up in business, which we hope will help boost growth across the UK.
