The Budget 2010

On 24 March 2010 Alistair Darling announced this year’s budget. The budget lays out changes in the United Kingdom’s fiscal policy. It is important to note that whilst some of the effects are immediate as of 25 March 2010, many will come into force as late as April 2011.

Housing

Stamp Duty Land Tax (SDLT) is a tax imposed on the buyers of properties and some leases. The level of tax varies and SDLT for residential properties is currently at the following rates:

Purchase Price SDLT rate
Value up to £125,000 0%
£125,001 - £250,000 1%
£250,001 - £500,000 3%
£500,001 and above 4%

Once the purchase price falls into a higher SDLT rate, the entire sale price is taxed at the higher rate. For example a property sold for £250,000 would be taxed at 1%, with tax payable totalling £2,500. Whereas a property sold for £250,001 would be taxed at 3%, with tax payable totalling £7,500.03.

Note exceptions are already in place that can affect SDLT, for example the SDLT rate of 0% is £150,000 in government designated disadvantaged areas.

The budget has made 2 changes to SDLT. The first change is that SDLT has been scrapped for first-time buyers of properties up to the value of £250,000. This measure is effective immediately and will be in effect for 2 years. Restrictions are applicable and these include the following:

  • When purchasing a property jointly all buyers must be first time buyers
  • No buyer can have previously owned a property anywhere in the world

The second change to SDLT is that on residential properties sales over £1 million the rate will permanently increase from 4% to 5% in April 2011.

Inheritance Tax (IHT)

The 2 rates of IHT are 0% and 40%. Each person has a Rate Band (NRB), which is taxed at 0% regardless of the total estate value. All assets above the NRB will be taxed at 40%. The current NRB is £325,000 and the budget has frozen this threshold until 2014. This means that the following IHT rates will remain as follows:

Assets IHT Rate
£0 - £325,000 0%
£325,001 and above 40%

Income Tax

The 50% income tax rise will come in force in April 2010 for those who earn over £150,000 a year.

Capital Gains Tax

The lifetime allowance for Entrepreneurs Relief is to be increased to £2 million from £1 million.

Capital Allowances

The annual investment allowance for small businesses has doubled to £100,000.

ISA Limit

The ISA limit is set to rise from £7,200 to £10,200 in April 2010 and thereafter will increase in line with inflation.

Pensions and Benefits

From 2012 there will be a £4 rise in child tax credits for parents with children aged one and two.

Tax relief on pensions will be restricted from 2011 on earnings of more than £130,000 per year.

The winter fuel allowance has been extended for a further year.

Fuel Duties

A 3p fuel duty rise is to be phased in three stages between April and January 2011. This is a change from the original plans to increase full duty in one go by 3% in April 2010.

Environment

£2 billion investment is planned to back low-carbon industries and renewable energy initiatives.

Further information: