EXPERT BLOGS


2010 UK emergency budget

Aidan Bailey of THE FRY GROUP explains implications of the UK’s new Emergency Budget.

 

Here’s what you should know about the UK’s new Coalition Government Emergency Budget, designed to reduce the country’s current deficit, balancing the £86bn gap between tax revenue and state spending.

Income Tax: Personal Allowance From April 2011, the basic personal allowance for those less then 65 years will be raised to £7,475. Reductions to the basic rate band will be announced later this year.

Capital Gains Tax (CGT): Rates and Entrepreneurs’ Relief CGT is now 18 percent for basic rate taxpayers and 28 percent for higher rate taxpayers, replacing the previous all-gain rate of 18 percent. A further 40 or 50 percent increase may happen in 2011. Expatriates remain exempt, for now.

Furnished Holiday Letting New FHL taxation documentation includes the following:

·         Applicable to European properties

·         Increase to number of days property is available and let out

·         Revised loss relief

State Pensions are re-linked with earnings. State pensions will increase yearly in tandem with earnings, inflation, or by 2.5 percent – whichever is greater.

Taxation of non-domiciled individuals will be reviewed, “to ensure non-domiciled individuals make a fair contribution to reducing the deficit, in return for greater certainty and stability for those bringing skills and investment to the UK,” says the Chancellor.

Corporation Tax (CT) Rates From 1 April 2011, companies with profits above £1.5M will incur a new CT rate of 27 percent. Those with profits below £300,000 will be taxed 20 percent.

VAT will increase to 20 percent from 4 January 2011. This will not affect zero-rated, exempt or reduced-rate supplies such as children’s clothing and books, education, health and domestic fuel and power.

Bank Levy will be based on banks’ balance sheets. Set at 0.07 percent, with a lower initial rate of 0.04 percent from 1 January 2011.

            According to the coalition’s plans, structural deficit will be balanced by 2015 and government borrowing will be reduced to 1.1 percent of the Gross Domestic Product by 2015/16. Although these ambitious targets translate to severe cuts in some public service sectors – health, schools and defence are not affected – general feedback has been positive.

 

Reactions

Ratings agency Moody applauds these plans, has confirmed the UK’s AAA status and declared the budget a "key step towards reversing the significant deterioration in the Government’s financial position that occurred over the past two years”.

  • The yield on 10-year gilts fell two points to 3.43 percent, indicating renewed confidence in public finances.
  • A more austere approach to fiscal policy will ensure monetary policy remains loose for some time. UK interest rates are likely to remain at record low levels over the foreseeable future.

Aidan Bailey BA (Hons) CertPFS AWPCM 

General Manager Singapore, International Division

 

Share this!

Posted by The Fry Group Mon, 26 Jul 2010 02:26:00 GMT