The Chancellor, Alistair Darling, delivered his Budget on 22 April 2009. This update briefly summarises the most important private client tax announcements.
For private client practitioners, the key issues from the 2009 Budget include new, higher rates of income tax for trusts and individuals and restrictions on higher rate relief on pension contributions and, on a rather more positive note, extension of tax reliefs for agricultural property and woodlands to cover property in the European Economic Area.
The key private client tax issues in the 2009 Budget were:
From 6 April 2010, the trust rates of income tax will be 42.5% for dividend income and 50% for other income. The new rates are 5% higher, and take effect a year earlier, than those announced in the 2008 Pre-Budget Report.
For individuals with taxable income over £150,000, new top rates of income tax will apply from 6 April 2010. The dividend additional rate will be 42.5% and the additional rate for other income will be 50%. Also, from 2010-11 the basic personal allowance for income tax will be reduced, for individuals with adjusted net income over £100,000, by £1 for every £2 over the income limit.
Restrictions on higher-rate tax relief on contributions to registered pension schemes will apply from April 2011 to people earning more than £150,000 a year. For those earning over £180,000, only basic rate relief will be available. Anti-forestalling measures, effective now, will be included in the Finance Bill 2009 to discourage those affected from making abnormal pension contributions in the run-up to April 2011.
The Chancellor announced an extension of the agricultural property and woodlands reliefs from inheritance tax to cover agricultural land and woodlands in the European Economic Area, with effect from 22 April 2009. Property in these categories will also qualify for capital gains tax hold-over relief for gifts of business assets.