How will the Budget affect your business?
The Chancellor gave his Budget Report on 22 April 2009
The full Budget report on the HM Treasury website - Opens in a new window.
The main points of interest for businesses are as follows.
Taxes, returns and payroll
The following is a summary of Budget changes that relate to individual and business taxes. You can find detailed information on these developments on the HM Revenue & Customs (HMRC) website - Opens in a new window.
There will be a temporary increase in the main rate of first-year capital allowances from 20 per cent to 40 per cent for expenditure over and above the annual investment allowance on plant and machinery. This measure will apply for one year from 1 April 2009 (corporation tax) and 6 April 2009 (income tax).
Find information on capital allowances on the HMRC website - Opens in a new window.
HMRC's Business Payment Support Service, which helps businesses spread their tax payments over a more convenient timeframe, will be expanded. Businesses expecting to make losses in accounting period or tax year 2009-10 will be allowed to offset these losses against corporation and income tax bills due on profits from the previous period or year. This means that businesses may be able to reduce their upcoming tax payments.
The three line account limit is being increased from the current amount of £30,000 for trading or self-employment income and £15,000 for property income to permanently align it with the VAT registration threshold to £68,000 from the tax year 2009-10. As a result, smaller businesses may be able to restrict the information they provide in their tax return to just their turnover, total allowable business expenses, and net profit or loss, rather than having to provide a detailed breakdown of their expenses.
From 1 May 2009, the VAT registration and de-registration thresholds will increase to £68,000 and £66,000 respectively.
The ability of businesses to carry trading losses back against profits of earlier years to get a tax refund will be extended by a year:
- for companies, to cover accounting periods ending between 24 November 2008 and 23 November 2010
- for unincorporated businesses, to include both the 2008-09 and 2009-10 tax years
Employers need to be aware that from 2010-11 an additional rate of income tax of 50 per cent will apply to income over £150,000 (not 45 per cent as announced in the pre-Budget report 2008). The basic personal allowance will also be gradually reduced to nil for those with incomes over £100,000.
From 6 April 2011, the tax relief on pensions contributions will be restricted for those with incomes of £150,000 and over, and tapered down until it is 20 per cent. Special rules apply from 22 April 2009 to prevent people from making large additional contributions to their pensions before April 2011 in order to benefit from higher rates of tax relief while it is still available.
Changes to VAT rules for trade within the EU will be introduced from 1 January 2010, including:
- changes to the place- and time-of-supply rules for the cross-border supplies of services
- the requirement to complete quarterly EC Sales Lists for those businesses who supply goods and/or services to business customers in other European Union countries where the place of supply of those services is the customer's country
- a new electronic VAT-refund procedure for cross-border supplies of services
Voluntary managed payment plans (MPPs) will be introduced to help taxpayers' cashflow. MPPs will allow taxpayers to spread their income tax or corporation tax payments equally over a period either side of their normal due date without incurring interest or penalties. These measures will be introduced under the 2009 Finance Bill but won't come into effect until April 2011 at the earliest.
HMRC will introduce measures to collect small debts it is owed through the PAYE (Pay As You Earn) system. These measures are likely to come into effect in April 2012.
Changes will be made to the company car tax regime from 2011-12. In particular, the lower threshold for carbon dioxide emissions will decrease from 130 grams per kilometre (g/km) to 125g/km and the £80,000 price cap that applies when working out the cash equivalent of the car benefit will be abolished.
There will be changes to the taxation of foreign profits. In particular, dividends and other distributions received from foreign companies will largely be exempt from corporation tax and UK distributions will be exempt to the same extent.
Find information on the taxation of foreign profits on the HMRC website - Opens in a new window.
Tobacco and alcohol duty increased by 2 per cent from 22 and 23 April 2009 respectively.
Duty on unleaded petrol and diesel will increase by 2 pence per litre (ppl) on 1 September 2009 and by 1ppl above indexation each year from 1 April 2010 to 1 April 2013 inclusive.
You should seek professional advice if you are unsure how any of these measures may affect your business. See our guide: choose and manage an accountant.
Finance and grants
A 'top-up' trade credit insurance scheme will be introduced to help businesses maintain their finances. The Government will - for a temporary period - offer to match trade-credit insurance provided by the private sector if insurers reduce cover to any UK business.
Employing people
From a date yet to be announced, the limit on a week's pay for the purposes of making statutory redundancy payments will rise from £350 to £380.
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