Darling’s budget leaves many tax saving option still available to individuals and businesses who are prepared to plan ahead says Peter Harrup of PKF.
The measures to support small firms were clearly politically motivated but welcome. The continuation of the tax deferral scheme for struggling businesses through HMRC's Business Payment Support Service is essential and the temporary cut in business rates will help some businesses.
Doubling the annual investment allowance to £100,000 may encourage businesses that have sufficient funds to invest in capital assets to invest now and bank the higher allowance just in case it is withdrawn in a post election Budget: no new Government is likely to withdraw allowances retrospectively.
At the other end of the business cycle, doubling the limit for entrepreneurs' relief to £2m for those wishing to sell their business is good news, even if now is not necessarily the best time to sell. But this good news will remain overshadowed by proposed increases in national insurance contributions in 2011/12, especially as, before Budget day, the Government ruled out any increase to the standard rate of VAT to tackle the Government deficit.
The cut in stamp duty land tax (SDLT) for first time buyers will be welcomed by many, although establishing who is an eligible first time buyer may be tricky. The fact that the Chancellor chose to fund the few tax cuts he announced from the funds raised by the bankers' bonus tax and a new rate of SDLT on houses worth over £1m rather than by increasing mainstream taxes no doubt stems from the proximity of the General Election.
The change to inheritance tax (IHT), freezing the nil rate band for the next few years, was not as bad as it might have been. Many IHT reliefs remain and, by planning to use them wisely, most families will still be able to avoid a significant IHT burden.
The most significant tax news items perhaps arise in the areas the Chancellor left alone. The 50 percent rate of income tax for those on £150,000 plus incomes will take effect in 2010/11.
There had been much speculation about an increase in the rate of capital gains tax from its current level of 18%, low by historically standards, Mr Darling specifically chose to leave it unchanged. This is good news for investors and possibly very good news for those who will be liable to the 50 percent income tax rate but can rearrange their investments to yield capital growth in the future instead of income.
The complex pension tax relief rules are here to stay for 2010/11 and look set to get worse in 2011/12 unless there is a change of heart.