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Main points from Budget 2009 for IT contractors
Posted Apr 22, 2009
In an uninspiring Budget for contractors, the Chancellor announced a headline-grabbing new 50% income tax rate from 2010, but no announcements were made on IR35 or other relevant tax measures.
Here are the headline tax changes announced today. Full analysis and reaction will follow in subsequent articles.
For 'non-contractor' changes, try the budget changes article on our small business site, Bytestart.
Budget 2009 - tax changes
- There will be a new 50% income tax rate from 6th April 2010, for taxable income over £150,000.
- The basic personal tax allowance will be gradually reduced to zero for people with 'adjusted net incomes' over £100,000 from 2010 - essentially, this means that the amount of the allowance will be reduced by £1 for every £2 above the income limit.
- New dividend taxes apply from April 2010 - dividends will be taxable at 10% and 32.5% as they are currently. However, dividends otherwise taxable at the new 50% additional rate will be taxable at a new 42.5% dividend additional rate.
- Tax relief on pensions will be reduced for people earning more than £150,000 a year from April 2011.
- The Small Companies' Tax Rate of corporation tax remains at 21% for the 2009-10 tax year
- The VAT registration threshold will rise to £68,000 from 1st may 2009 (previously it was £67,000).
- The standard rate of VAT will return to 17.5% from 1st January 2010.
- No stamp duty will apply for house purchases of under £175,000 - extended until the end of 2009.
- The ISA limit will be increased to £10,200 (of which £5,100 can be saved in cash ISA) from the 2010 tax year onwards (and from this year for people over 50 years old).
- IR35 wasn't even mentioned, and any action on 'income shifting' was deferred in the 2008 PRB. The Government says it will "keep this issue under review".
Further resources
HMRC's 222 page Budget 2009 document (PDF) - contains details on all rate/allowance changes.
HM Treasury - Budget 2009 microsite.
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