Pre-Budget Report summary

There have been a lot of detailed reports flying around on email so rather than go into the detail, this is a quick summary of the key issues that may affect you.

National Insurance - the contribution levels will increase by 1% in April 2011.

Inheritance Tax - the nil rate band has been frozen at £325,000.

VAT - as planned, the tax will return from the current rate of 15% to 17.5% on 1^st January 2010.

Pensions

The background

In April 2009's Budget the Chancellor announced that, from 6 April 2011, individuals with gross income of £150,000 or more will have their tax relief restricted.

Relief will be tapered so that for those with gross income of £180,000 or more, tax relief will be restricted to 20%.

The Treasury/HMRC has now issued a consultation document on implementing the restrictions in tax relief. The consultation is open until 3 March 2010.

‘Anti-forestalling' measures also restrict higher rate tax relief for certain individuals from 22 April 2009.

In the Chancellor's pre-Budget report on 9 December 2009 he announced two additional measures to those previously introduced:-

1. Employer contributions will be included in the definition of income for this tax measure from 6 April 2011. But individuals with income less than £130,000 BEFORE employer contributions are taken into account will NOT see restrictions to their tax relief.

2. Anti-forestalling measures will be extended to those with ‘relevant income' of £130,000 or more from 9 December 2009.

Therefore, the number of individuals affected by anti-forestalling is increased with effect from 9 December 2009. (Estimates differ from 50,000 to 150,000 people).

The measures now include those whose income is £130,000 or more (for the current or either of the previous two tax years), who change their regular pension saving habit on or after 9 December 2009, and whose total annual pension savings exceed the ‘special annual allowance' of £20,000. Note: the special annual allowance may be increased up to £30,000 for those with a pattern of ‘infrequent' pension contributions in the previous three tax years.

We understand the detail of these changes (and more) so just call if you need us to explain any of them.