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The 2010 budget

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Yesterday the Chancellor delivered a Budget speech with one eye firmly on the up-coming General Election. The headline measures such as relief from Stamp Duty Land Tax for first-time buyers and index-linking ISA limits were aimed at pleasing the man in the street, as were the tax increases for the wealthy that he announced. On the face of it, the announcement by the Chancellor yesterday places the burden of the increased taxes that are needed to cope with the burgeoning national debt firmly on the shoulders of those who can afford to pay more tax. Measures such as the 50% additional rate of income tax on those who earn over £150,000 and 5% stamp duty on properties worth over £1 million are tax increases that are calculated to win votes rather than lose them. However the measures that the Chancellor did not trumpet yesterday, in particular the freezing of income tax thresholds, will hit hardest the least well off as will the increase in fuel duty that is being phased in. Personal tax The announcement that has grabbed the headlines is the temporary exemption from Stamp Duty Land Tax (SDLT) for first time buyers who are buying a property for less than £250,000. If, and it seems to be a big if, a first time buyer is able to get a mortgage offer, they will certainly have to have a much larger deposit in these post credit crunch times, so a saving of between £1500 and £2500 will be a big help not only to the first time buyer but also to the housing market as a whole. The concession will be paid for in part by increasing the SDLT rate on residential properties worth over £1 million to 5%. There are hopes that this could stimulate at least a short term move in the property market, as sellers at the top end try to move before the tax rise is introduced. As had already been announced, a new income tax rate of 50% for those earning over £150,000 is to be introduced and personal allowances are to be restricted for those earning over £100,000. For most people, however, income tax rates and thresholds remain unchanged, as do the rates and thresholds for capital gains tax and inheritance tax. Effectively this represents a substantial tax increase because normally these thresholds are increased, at least in line with inflation. Households will also face an increase in duty on a pint of beer by 2p, on a bottle of wine by 10p, and on a bottle of whisky by 36p. Of importance to both individuals and business is the staged introduction of the scheduled increase in fuel duty, which will rise by 2.76p but with the increase phased in over the period 1st April 2010 to 1st January 2011. Various initiatives were also introduced to tackle tax avoidance, in particular penalties for tax payers who fail to declare offshore income or gains. The penalty will vary from 100% to 200% according to the transparency and cooperation of the jurisdiction in which the income or gains arose. Businesses Two measures were introduced to boost investment and business start ups. The amount of capital expenditure on qualifying assets that can be set against profits for tax purposes was increased from £500,000 to £1 million, and the lifetime capital gains tax threshold enjoyed by entrepreneurs who sell their business was increased from £1 million to £2 million. To help struggling businesses, the Chancellor announced an extension of HMRCs business payment support service which enables businesses that cannot pay tax on the due date to negotiate payment over a period of time. In another helpful measure losses incurred between 24 November 2008 and 23rd November 2011 may be carried back three years rather than just one year; this is an extension of an existing temporary relief. Other issues which business will be watching include environmentally-rated measures that include a halving of the company car tax on ultra low CO2 emitting cars; a hike in air passenger duty, which goes up from 1st November 2010; and landfill tax which is set to be increased from £48 to £56 per tonne from 1st April 2011.

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