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Budget 2010


Introduction

Personal Income Tax

Tax Credits

National Insurance Contributions

Employees

Savings

Capital Gains Tax

Inheritance Tax

Stamp Duty Land Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance

Savings


Pension contributions (Table B)

According to rules announced in 2006, the maximum amount of a tax-efficient pension fund from which benefits are drawn in 2010/11 is £1.8m. If an employee or self-employed person contributes personally, tax relief will be available on a payment of up to 100% of current year earnings to the maximum of £255,000. The maximum employer contribution to a pension fund that will enjoy tax relief is £255,000, less any amount put in by the individual.

However, the Chancellor announced in 2009 that pension relief would be restricted from 2011/12 for those earning over £150,000pa. In order to stop those affected advancing their pension contributions to beat the change,"antiforestalling rules" were introduced. These are complicated, but in essence they can apply to anyone who earns over £130,000, if they pay contributions of more than £20,000 in 2009/10 or 2010/11, unless they had contracted to pay contributions at that level before the new rules were announced. Anyone who thinks they might be affected should take advice before paying extra contributions.

This Budget also included more details of how the relief will be restricted for high earners from 6 April 2011 onwards. Someone with total income of £150,000 (before deduction of pension contributions) will enjoy 40% tax relief on their contributions; someone with total income of £180,000 or more will only enjoy relief at the basic rate (currently 20%). In between these levels there will be a proportional withdrawal of the marginal rate relief.

Tax Trap
Review pension contributions but watch the anti-avoidance rules.

Individual Savings Accounts

As announced last year, the investment limit for ISAs rises on 6 April 2010 to £10,200 a year (with no more than £5,100 in a cash ISA). The limit rose to the higher figure on 6 October 2009 for those aged 50 and over by 5 April 2010.

The Chancellor announced that the limit will increase in line with inflation in future years. The measure of inflation will be the annual increase in the retail prices index to the previous September (e.g. September 2010 for 2011/12), and the result will be rounded to the nearest multiple of £120 to make monthly savings plans easier to operate.