Chancellor Alistair Darling has presented the 2009 Pre-Budget Report, to a politically charged House of Commons. In the context of the global recession, and with a General Election looming, this year's statement has particular significance.
Despite revising down his economic growth forecast from -3.5% to -4.75% for 2009, and increasing his public sector net borrowing forecast from £175 billion to £178 billion for 2009/10, the Chancellor insisted that global confidence is returning, and predicted that the UK economy will return to growth by the turn of the year.
Describing this as a 'critical time' for the economy, the Chancellor outlined a number of measures aimed at securing economic recovery and promoting growth.
Key measures for businesses include a deferral of the planned 1% increase in corporation tax for small firms and an indefinite extension of the 'time to pay' scheme. Empty property relief will be extended from 2010/11 for business properties with a rateable value below £18,000, and the Enterprise Finance Guarantee Scheme will also be extended for one year.
Citing the need for 'difficult choices', the Chancellor confirmed that national insurance contributions will rise by a further 0.5% from April 2011, although the starting point will be raised so that those earning less than £20,000 will not be affected. The negative RPI to September 2009 meant that many allowances and thresholds were unchanged.
The temporary cut in VAT will end on 1 January 2010 as planned, with the standard rate reverting to 17.5%. The so-called stamp duty 'holiday' will come to an end at the same time, while the individual inheritance tax allowance will be frozen at £325,000 until 2011.
A much-anticipated announcement regarding bankers bonuses sees the introduction of a new one-off 50% 'super tax' on bonuses exceeding £25,000, payable by the bank. Plans to reduce pension tax relief for those earning in excess of £150,000 were also confirmed.
Meanwhile, 'green' measures include the introduction of a new 'boiler scrappage scheme', together with plans to exempt electric cars from company car tax for five years, and a 100% first year capital allowance for electric vans.
The Chancellor also confirmed a new 50p a month tax on telephone landlines, which will be used to fund next generation broadband services.
Do please contact us for specific advice about how these announcements might affect you or your business.