Post Budget highlights
JUNE 23RD, 2010 By DOMINIC
We all listened with interest to the Budget which did not throw up too many nasty surprises although the Coalition Government’s announcements are significant.
The devil they say is in the detail and there were a few top line announcements which we are yet to see the finer points.
I’ve highlighted a few key points below:
Capital Gains Tax (CGT)
- CGT has risen today for higher rate tax payers to 28%.
- The annual CGT exemption remains at £10,100 and will continue to be indexed.
Given all the speculation this comes as a welcomed announcement for most investors (who will continue to pay CGT at 18%). This will provide much relief for those who have retired.
- An increased limit for Entrepreneur’s Relief qualifying gains from £2m to £5m.
Small to medium sized businesses are the life blood to any economy so this is positive news for entrepreneurs and minority shareholders as it rewards enterprise.
Pensions
- The previous Labour Government outlined changes in 2009 aimed at reducing the higher rate tax relief it gives on pension contributions for those earning over £150,000. While the Coalition Government have not said they will reverse this decision they have announced that they would like to create a much simpler way of achieving the desired outcome such as reducing the annual allowance.
We welcome the decision not to abolish higher rate tax relief outright which was one of the Liberal Democrats manifesto pledges and hope that the system they propose to introduce will be easier to understand and implement than the one Labour had outlined.
Annuities and retirement age
- The existing rules which effectively require you to purchase an annuity at the age of 75 will end in 2011 meaning you’re not obliged to exchange the fund for an income stream until age 77.
We welcome this as it will give individuals more choice and flexibility as does the ending of the default
retirement age of 65.
Basic state pension
- The current basic state pension rises in line with inflation.
Traditionally it rose in line with earnings, however the link was broken by the previous Conservative Government and since then earnings have increased at a higher rate than inflation.
From now on the basic state pension will rise each year in line with the higher of either; 2.5%, inflation or earnings.
This is a much fairer system and is good news for those who rely more on the basic state pension.
Over the next few weeks we’ll dig up some useful examples of how we’ve managed these announcements for our clients. Tax efficiency measures will become key.
Posted in: General Information