22 April 2009
Kleinwort Benson, recently shortlisted for the Best In-House Tax Team in this year’s LexisNexis Taxation Awards, today acknowledged that the 2009 Budget was set against a very difficult economic backdrop, and the measures introduced are reflective of this.
Alistair Darling made reference throughout his speech to the tough economic times both individuals and businesses are experiencing, and introduced a variety of measures to ease the financial pressure that families are facing.
The Budget’s themes of "fairness" and "opportunity" were highlighted by Darling on a number of occasions, as he outlined the Government’s plans to spend its way out of trouble by investing across a number of sectors, including energy, housing and education.
The announcement that income tax for those who earn over £150,000 will increase to 50% as of 6 April 2010, coupled with a restriction in relief for pension contributions for these higher earners and a tapered reduction to the personal allowance to nil, is a clear statement of intent by the Chancellor and the impact of these increases will be seen in the years to come.
An increase in tax rates is unlikely to be popular, particularly in light of the increase in National Insurance Contributions for the same group of people announced in November’s Pre-Budget Report.
The prolonged reduction of VAT to the end of 2009, along with the increase in capital allowances and the extension to business loss carry back, were all welcomed by Kleinwort Benson. However, once again, trusts have been dealt a blow by the Chancellor with the trust tax rate increasing to 50% (with the rate for dividends increasing to 42.5%).
HMRC have also sought to harmonise their practices in relation to time limits, penalties and interest payments, and although still under consultation, a HMRC Charter will certainly make for interesting reading. The Government’s continued intent to focus on the issue of tax avoidance and alleged tax "loop holes" was also made clear by Darling in his speech.
Jeremy Croysdill, Head of Tax Services at Kleinwort Benson, remarked: "Higher rate taxpayers will be hit hard by this budget, but the increases are needed to fund the various proposals that the Chancellor has introduced. This is clearly a symbolic message that the Government is sending out, but the real impact of these measures remains to be seen."
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Notes to Editors:
About Kleinwort Benson
Kleinwort Benson is one of the most historic names in UK banking with roots dating back to the 1850s. Kleinwort Benson is the brand name of Kleinwort Benson Private Bank Limited (established in 1962 from the merger of Kleinwort Sons & Co and Robert Benson & Co) and its subsidiaries. It is registered in England at 30 Gresham Street, London, EC2V 7PG. Registration number 2056420. It is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange. It operates throughout the UK from a principal office in London and branches in Birmingham, Edinburgh, Cambridge, Leeds Manchester, and Newbury.
Kleinwort Benson is also the brand name of Kleinwort Benson Channel Islands Holdings Limited and its subsidiaries. It is registered in Guernsey at Dorey Court, AdmiralPark, St Peter Port, Guernsey GY1 3BG. Registration number 24786. It operates in the Channel Islands through its principal subsidiaries which are regulated by the Jersey Financial Services Commission and the Guernsey Financial Services Commission.
Kleinwort Benson is a member of Commerzbank Group AG.
This information is issued by Kleinwort Benson for the information of the addressee only. Kleinwort Benson as issuer shall not be liable for any loss or damage arising as a result of failure to update information, transmission errors or communications breakdown. Past performance cannot be taken as a guide to future returns and, in particular, investors may not get back the amount originally invested. The references to tax are based on Kleinwort Benson’s understanding of the current law and UK Revenue and Custom treatment, which can change under future legislation.