Some thoughts and information re the Budget 2009

New Higher Rates of Tax

The new marginal rate of income tax of 50% applies to income over £150,000 starting
from April 2010. This is above the planned increase of 45% and a year earlier! What
has been less publicised is the progressive withdrawal of the tax free personal
allowances by £1 for every £2 income exceeds £100,000. This means those earning
between £100,000 and £112950 suffer a marginal rate of income tax of 60%.

Where possible it would seem sensible to advance income and pay tax now before 5
April 2010 at only (!) 40%. Or consider using a company to control the extraction of
profit or maybe share options possibly taxed as capital gains at only 10-18%?

Further Extension of Carry Back of Trading Losses

The ability to carry back losses of up to £50,000 up to three years (instead of just one
under the old rules) has been extended for unincorporated businesses to 23 November
2010 ie tax years 2008/09 to 2009/10. For limited companies the extension applies to
those with accounting periods ending between 24 November 2008 and 23 November
2010.

Help with Time to Pay Taxes

The Business Payment Support Service http://www.hmrc.gov.uk/pbr2008/business-

payment.htm has been instructed to accept “time to pay” arrangements in a wider
range of circumstances. The advisers have been asked to take account of reasonable
estimates of current year losses in pressing for previous years taxes.

Relief for Pension Contributions restricted at Higher Rates

From 6 April 2011 the relief for pension contributions for higher rate taxpayers
earning above £150,000 will be restricted gradually so that those individuals with an
annual income of £180,000 or more will effectively receive only a 20% tax deduction,
the same as a basic rate tax payer. This may mean that some individuals will only
receive relief at 20% but will later be taxed on their pension income at 50%.

Furnished Holiday Letting Relief to be abolished

The relief for loss making short term letting businesses will be abolished from 6 April
2010. These rules currently allow the offset of losses often made on holiday letting
income against other taxable income subject to certain conditions.

However in the meantime HMRC does accept that it cannot discriminate as it did
previously against individuals owning property in the EU – as opposed to in the UK.
This means properties within the EEA area now qualify for relief until it’s general
abolition in April 2010.
Budget Funny!

Some tweets below captured live on Wednesday from inside the Treasury (allegedly)

“ BUDGET CONSULTATION: Please tweet us your ideas for the Budget as Alistair
has not got a clue. The final TwitBudget will be published here.

BUDGET2009. Treasury msg to HMRC: Sh+tting ourselves here, we haven't finished

writing the Budget yet and Alistair has gone AWOL

Budget2009 update: Alistair has locked himself in the toilet and won't come out.
Gordon has called in MetPolice to break down the door.

Budget2009: Back of fag packets currently being assembled into final document

#budget09 Alistair forgot to say "minus" before the growth forecast figures for 2010
and 2011. Next government's problem anyway “

Hat tip for that to http://twitter.com/HMRevenue

You can follow me on Twitter http://twitter.com/andrewcazalet

There is a good summary of the main general Budget provisions here -

http://news.bbc.co.uk/1/hi/uk_politics/8011882.stm

Please do get in touch if you have any questions or clarification. Feel free to pass this
on if you know anyone who might be interested.

Have a good weekend

Andrew Cazalet
Chartered Tax Adviser
M - 079415 80062 - Main Contact No
T - 020 8584 5319
F - 0870 8550453
EM - andrew.cazalet@lidotax.co.uk - new but old address still works
Skype - lidotax
W - www.lidotax.co.uk
Address - as below