The Chancellor of the Exchequer presented Budget 2009 on 22 April. The following are the key announcements:

Personal Tax and Individuals

Tax Rates and Allowances

The Chancellor, has announced the following changes to tax rates and allowances for taxpayers with income over £100,000:

• from 2010–11, there will be an additional higher rate of 50 per cent for taxable income above £150,000;
• from 2010–11 the basic personal allowance for income tax will be gradually reduced to nil for individuals with “adjusted net incomes” above £100,000;
• from 2010–11 there will be increases to the trust rate and dividend trust rate to match those for income tax; and
• the measure includes new powers to vary the income tax rates for the charges that apply to registered pension schemes.

Taxation of foreign dividends

The non-payable tax credit on dividends from foreign companies will be extended to certain large shareholdings in foreign companies.

Furnished holiday lettings

From 2010/11 losses from furnished holiday accommodation will not be able to be set against other personal income. In the meantime it will be possible to set losses from furnished holiday accommodation situated in the European Economic Area against other personal income.

Tax Relief on Pension Contributions

The Chancellor has announced that, starting in 2011–12, tax relief on pension contributions will be restricted to basic rate for individuals with an annual income of £150,000 or higher.

In anticipation of this change, there will be special rules which will apply from Budget Day (22 April 2009) to prevent people from making large additional contributions to their pensions before then in order to benefit from higher rates of tax relief while it is still available. These changes do not affect the vast majority of individuals. They affect only those who have a total annual income of £150,000 or higher in the current tax year or in either of the preceding two tax years.

Business Tax: Corporate and Self Employed

Corporation Tax Rates

The main rate for Financial Year (FY) 2010 will be 28% (unchanged from FY 2009). Legislation will be introduced in Finance Bill 2009 to maintain the small companies’ rate at 21% for non-ring fence profits. The small companies’ rate for ring fence profits will also remain at 19% for the financial year 2009–10.

Capital Allowances – First Year Allowance

The Chancellor has announced a new temporary 40% first-year allowance (FYA) for expenditure on general plant and machinery will apply to qualifying spending incurred in the 12 month period beginning on 1 April 2009 for corporation tax, and on 6 April 2009 for income tax.

Loss Relief

The support announced by the Chancellor at the November 2008 Pre Budget Report will be extended for a further year. This allows businesses to carry back trading losses against profits of earlier periods

Compliance Proposals

Publishing names of serious tax defaulters on HMRC Internet

The Chancellor has announced that the names and details of serious tax defaulters will be published in certain circumstances.

Legislation will be introduced in Finance Bill 2009 enabling HMRC to publish the names and details of individuals and companies who are penalised for deliberate defaults leading to a loss of tax of more than £25,000. Names will not be published of those who make a full unprompted disclosure or a full prompted disclosure within the required time.

Offshore Disclosure

The Chancellor has announced a New Disclosure Opportunity for UK residents with unpaid tax connected to an offshore account. The NDO will run from autumn 2009 for a limited period to give the offshore account holders one final opportunity to disclose, and put their affairs in order.

VAT Changes

The temporary rate of 15 per cent will cease on 31 December 2009, and the standard rate of VAT will return to 17.5 per cent from 1 January 2010.

VAT changes to modernise cross border trading will be introduced over a 3 year period from 1 January 2010.

Excise Duties

Alcohol duty

Is increased by 2 per cent from 23 April.

Tobacco duty

Is increased by 2 per cent from 6:00pm 22 April.

Fuel duty

Is increased by 2 pence per litre from 1 September 2009.

Stamp Duty Land Tax

The Chancellor announced an extended “holiday” from stamp duty land tax (SDLT) which exempts any acquisitions of residential property of not more than £175,000. The holiday now applies to acquisitions between 3 September 2008 and 31 December 2009 inclusive.

Review of Powers

Launching a new Taxpayer Charter later in the year

Legislation will be introduced requiring HMRC to prepare and maintain a Charter. The Charter willset out standards of behaviour and values to which HMRC will aspire in dealing with taxpayers and others.

Full details on all the Budget 2009 announcements are available at http://budget.treasury.gov.uk/.