The Pre-Budget Report 2009: Wow’s Verdict

The Chancellor, Alistair Darling has insisted in the pre-Budget report that although the recession has been the worst in modern history, the UK economy is on track to recover and will return to growth next year. The plan is to halve the deficit (currently standing at £178bn) in four years, through spending cuts and increases in taxes. A new levy on bonuses for bankers and an increase in National Insurance of 0.5% (in addition to the already-planned 0.5% increase) was announced.

But, with one eye on the General Election next year, much of the pain associated with the tax rises won't be felt for over 12 months. So, what does this all mean for small businesses?

The Economy

• The UK economy is expected to shrink by 4.75% in 2009, which is an increase on the original figure of 3.5%, which was estimated in April
• The Economy is set to grow by 1 - 1.5% in 2010 and by 3.5%, which in 2011-12
• Inflation is predicted to increase from 1.5% to around 3% early in 2010, before falling back

Small Businesses

• A 12 month extension to the Enterprise Finance Guarantee scheme, which provides bank loans to small businesses, guaranteeing a further £500m of loans
• Deferring, for an extra year, the planned increase in the Small Companies’ rate of Corporation Tax, meaning the 2010 tax rate will remain unchanged at 21%
• 10% Corporation Tax rate to be introduced on income which arises from patents in the UK from April 2013, to drive innovation and investments in innovative industries
• The Time To Pay scheme allowing firms to spread tax payments will be extended for as long as needed.
• Empty property relief threshold to be extended so that 70% of all empty properties will be exempt.

National Insurance

• From April 2011 all Employer, Employees and Self-Employed rates of National Insurance will increase by 0.5%. This is in addition to a 0.5% increase already announced, which means that in 2011/12 National Insurance levels for both employees and employers will increase by 1%. 
• There will be an increase in the point at which individuals start to pay National Insurance, to protect people on incomes below £20,000

Tax

• One-off 50% tax on bank bonuses of more than £25,000
• Stamp duty holiday on certain properties to end on 1 January 2010
• Bingo duty to be cut from 22% to 20% (we’re all off to our local bingo hall tonight to celebrate!)
  

Pensions

• The basic state pension is set to rise by 2.5% in April 2010
• Employer pension contributions to be included in definition of 'relevant income' relating to pensions tax relief, for those earning over £130,000.

Green/Environment

• A new boiler scrappage scheme to help up to 125,000 homes replace inefficient boilers
• From April 2010, people with a home wind turbine or solar panels who send power back to the National Grid to receive an average tax-free payment of £900 a year

Telecoms:

• Super-fast broadband to be extended to 90% of population by the end of 2017, which will be funded by a 50p-a-month duty on landlines.

 

Visit the Wow Blog at http://wowcompany.blogspot.com/ to discuss your thoughts on today's pre-Budget report.

For a more in-depth discussion of how the 2009 pre-Budget may affect your personal situation, feel free to call the Wow team on 0845 201 1582 or e-mail info@thewowcompany.com with your queries. We will be able to answer them from Thursday morning.