The budget was announced by the Chancellor, Alistair Darling, on Wednesday 24 March 2010. For small businesses, the Budget had very little real effect and there were only minor changes from what had previously been announced. Here is a summary of the changes we think apply to our customers.
Corporation tax rate for small companies
The corporation tax rate for small companies (companies with annual profits lower than £300,000) remains at 21%. There is still a proposal in place to change this to 22% next year, but this will depend on the outcome of this year’s general election (and the Conservative party has promised to reduce this rate to 20% as soon as possible, if elected).
Annual Investment Allowance
The Annual Investment Allowance (AIA) has been doubled to an annual spend of £100,000. In practice this measure will not impact our clients. The Annual Investment Allowance is currently £50,000, and enables businesses to claim full tax relief on capital expenditure in the year the capital items were purchased. Very very few of our clients have ever spent more than £50,000 on capital items in a single year.
Personal tax rates and allowances
There are no changes to the personal allowance or rates of tax. The only addition is the new tax band of 50% that applies to income over £150,000. The personal allowance remains at £6,475, and any income above this is taxed at;
£0 to £37,400 – 20%
Then up to £150,000: – 40%
Then over £150,000 – 50%
Entrepreneurs’ relief
This is relief from capital gains tax resulting from the disposal of a business – and is very useful of a number of our clients when they decide to wind up their business. The relief currently applies to permit a maximum 10% capital gains tax charge on gains of up to £1 million (the lifetime allowance). This life time allowance has now been increased to £2 million.
VAT Changes
While no changes to the standard VAT rate of 17.5% were made (and none were expected), there have however been small adjustments to the VAT registration thresholds. From 1 April 2010 the taxable turnover threshold increases to £70,000 from its current threshold of £68,000 – this is the threshold above which you MUST register for VAT, calculated on a rolling 12 month basis. The threshold which determines whether you may apply for VAT deregistration increases to £68,000 (from £66,000).