The PBR did not affect farmers and landowners in the way some thought it might.
The Chancellor announced his Pre-Budget Report (PBR) on 9 December. Focusing on the positives, farmers and landowners can breathe easily again; for a while, at least.
A wealth tax was rumoured, and although the inheritance tax (IHT) nil rate band for 2010/2011 now remains at the current level of £325,000, this is a minor irritation compared to the worry that IHT could be increased to 50% on £1m+ estates. More importantly, no changes to agricultural property relief or business property relief were made, and the capital gains tax (CGT) rate remains at 18%.
However, it would be dangerous to relax too much, and the key message must be to start planning now for the tax year ahead.
Other key points
- The small companies corporation tax rate, which was to increase in 2010/2011 to 22%, will remain at this year's 21%. This is welcome, although there was unfortunately no help announced for businesses making short-term losses.
- The real sting in this PBR was the unexpected additional increase to National Insurance. The extra 0.5% (now a full 1% from 6 April 2011) applies to both employees' and employers' contributions, therefore a total increase of 2% will apply to those drawing a salary from their own company.
- The previously announced changes to furnished holiday lettings (FHLs) from 6 April 2010 have been confirmed. Anyone with an FHL should review opportunities under the existing rules prior to 6 April 2010, particularly if contemplating a sale. Think about extra services you can provide to change the service from lettings to a 'hotel service' to keep the activities as trading. " The PBR has increased a number of green measures, particularly in relation to offshore wind projects. There was a further £400m allocation to support business investment in low carbon initiatives and help households reduce energy costs.
- VAT, will, as expected, return to 17.5% from 1 January 2010.
Smith & Williamson has produced a full commentary to the PBR. This is available on our website: http://www.smith.williamson.co.uk/pre-budget-report
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