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Investment Property Accountants

Budget 2009 - A Financial Planning Perspective

On 22nd April 2009, Chancellor Alastair Darling delivered his 2009 Budget speech, which included a number of revisions to proposals in his Pre-Budget Report. Below are, therefore, the principle details relating to financial planning matters.

Income Tax

The most significant measures announced, to apply with effect from 6th April 2010, were: -

• A single tier tapering of the personal allowance for individuals with annual incomes over and above £100,000. Please see our recent article ‘The 60% Tax Trap ’ for further information regarding this.

• A new 50% rate of Income Tax for those individuals with incomes above £150,000 per annum. The corresponding rate applying to dividend income will be 42.5%.

• Application of the above rates of tax for trustees on trust income.

Capital Gains Tax (CGT)

No major changes were announced to CGT. The annual exemption for 2009/2010 has been increased to £10,100 for individuals and £5,050 for most trusts.

Inheritance Tax (IHT)

No major changes were announced to IHT. The nil rate band increased to £325,000 as had been previously intended.

Individual Savings Accounts (ISAs)

With effect from 6th October 2009, the overall annual contribution limited will rise to £10,100 for clients aged 50 and over. With effect from 6th April 2010, this limit will apply to all individuals.

Of this increased allowance, £5,100 may be held in a cash ISA with one provider, with any unused allowance available for investment into a stocks & shares ISA with the same or another provider.


The Lifetime Allowance for 2009/2010 is £1.75 million. This is due to increase to £1.8 million in 2010/2011. In the November 2008 Pre-Budget Report, the Government announced its intention to freeze this allowance at £1.8 million for the next 5 years.

The Annual Allowance for 2009/2010 is £245,000. This is due to increase to £255,000 in 2010/2011. In the November 2008 Pre-Budget Report, the Government announced a freezing of this allowance at £255,000 for the next 5 years.

The Government has announced that it intends to restrict the availability of higher rate tax relief on contributions to registered pension schemes for people with taxable income of £150,000 p.a. or more. Relief will be tapered so that for those earning £180,000 p.a. and over, relief will be worth 20% (the same as a basic rate taxpayer). The way tapering will work is yet to be determined. This change will take effect from 6 April 2011.

In anticipation of the new restriction, the Government is introducing new rules to apply from 22 April 2009 to restrict higher rate tax relief for individuals with taxable income of £150,000 p.a. or more. Note that taxable income for this purpose includes the amount of income forgone in return for pension contributions in a salary exchange arrangement.

The anti-forestalling provisions apply to individuals: -

• whose income is £150,000 per annum or more in the current or either of the two preceding tax years;
• who change the pattern of their ‘normal ongoing regular pension savings’; and
• whose total pension savings following any change, including employer pension contributions, exceed £20,000 per year.

It is highly recommended that any individuals potentially caught by this legislation should approach any planning with caution and with the benefit of independent financial advice. More information on this subject is to be published shortly.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Should you have any queries or wish to discuss any of the points raised, please contact Jeff Crewdson, Steve Prosser or Chris Raggett on 0161 477 6789.

Date of Article: 1st June 2009

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This domain is owned by Warr & Co Chartered Accountants which is a member of the Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Peter Edwards on 0161 477 6789 or email us at