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Budget: Personal tax summary

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24th Mar 2010
Deputy Editor Sift Media
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A breakdown of the key measures in today’s Budget report.

Capital gains tax - Entrepreneur's relief
HMRC Budget Note 27 (BN27) confirmed an increase in the lifetime limit on entrepreneur's relief from £1m to £2m with effect from 6 April 2010. Where individuals or trustees make qualifying gains above the previous £1m limit before 6 April 2010, no additional relief will be allowed for the excess above the old limit. But if they make further qualifying gains after 5 April 2010, they will be able to claim relief on up to a further £1 million of those additional gains, giving relief on accumulated qualifying gains up to the new limit of £2 million. The other rules for entrepreneurs’ relief are unchanged. Gains qualifying for the relief will continue to be reduced by the fraction 4/9, leaving the effective rate of capital gains tax on these gains at 10%.

Personal allowances
The chancellor confirmed the basic rate of income tax will be 20%, the higher rate will be 40% and the additional rate will be 50%. Personal allowances will remain at their existing amounts.

Inheritance tax
While the IHT nil rate band remains frozen for the next four years at £325,000, PKF suggests more tax raising measures could emerge. “Relatively simple rule changes could enable the chancellor to raise more revenue in the future. Tightening the rules on gifts could bring more funds into the IHT net and higher rates of tax on larger estates, perhaps a 50% rate on estates of over £5m, could raise significant amounts”.

Pensions
The chancellor confirmed the £130,000 threshold on pensions anti forestalling measures announced in the Pre-budget Report. As announced in December's Pre-Budget report, tax relief on pension contributions will be restricted to the basic rate for those with income of over £180,000; those in the band £150,000 to £180,000 will see their tax relief reduced proportionately until they reach the £180,000 limit. Workers earning salaries of between £40,000-80,000 who receive a promotion, relocation expenses or a redundancy payment they could be caught under the proposed regime and earning around £130,000 could be affected if employers’ pension contributions push them over the proposed £150,000 limit.

Anti-avoidance measures

  • The chancellor plans to bring forward the point at which advisers have to notify HMRC when they refer clients to third party promoters under the Disclosure of Tax Avoidance Scheme (DOTAS). BN64 describes the new "trigger point" as occurring when "a promoter first communicates a fully designed scheme to a third party". Any adviser who sends a client to such a scheme will have to notify HMRC of the promoter's name and address, not just the client's. Higher penalties for failure to comply with a disclosure obligation, subject to determination by the Tribunal. New requirement for promoters to provide HMRC with periodic information about clients who implement a notifiable scheme for SRNs issued on or after the date the regulations come into force.
  • Darling also announced that the government will sign tax information exchange agreements (TIEAs) with three offshore tax havens: Dominica, Grenada and Belize – the latter being the home to the Conservative Party deputy chairman. nder a TIEA, UK tax investigators can ask for information from the co-signatory country about any person who is under scrutiny. Darling argues that such anti-avoidance measures will raise £500 million and protect tax revenues of £4 billion. An agreement with Liechtenstein will raise £1 billion in its own right. Click here for further detail.  

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