Chancellor George Osborne set the scene for what was to follow in his first Budget stating that “it pays for the past and it plans for the future". He set out his objectives to deal with the country’s deficit in a “fair” manner and balance the Treasury’s books by 2015.
The Government is relying upon the private sector to help the country recover. In order to assist UK businesses the Chancellor has proposed cuts in corporation tax over the next five years.
The key tax changes are:-
- VAT will rise to 20% from 4 January 2011 which should make the pre-Christmas trading period an even busier time for retailers.
- From 23 June 2010 Capital Gains Tax rises to 28% for higher rate tax payers but remains at 18% for basic rate tax payers. As a compensatory measure the lifetime limit for Entrepreneurs Relief substantially increases to £5 million. This is potentially worth £240k of tax saving per entrepreneur.
- Income Tax Personal Allowances are set to rise by £1,000 from 6 April 2011 in order to help lower paid employees but the basic rate tax limit is being reduced so that this relief will not be enjoyed by higher rate tax payers.
As ever the devil will be in the detail for much of it. One other positive point is that UK Research & Development Tax Credits in their current form are safe for now. Consideration will be given to the proposals contained in Sir James Dyson's report. Expect a more focused regime to be announced in the autumn, targetted at SMEs .
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