27th March 2010

Who benefits from 2010 Budget

Savers and first-time home-buyers are the only contractors who will benefit from this year’s Budget. The Chancellor confirmed the freeze in personal allowances, which means all contractors will pay more tax in real terms in the coming financial year.

Key measures for contractors include:

•    Fuel duty is to increase by 1p in April, 1p in October and 1p in January 2011
•    ISA allowances are increased from £7,200 to £10,200
•    First-time buyers pay no stamp duty on house values up to £250,000, a measure to be paid for by a 5% extra stamp duty on the sales of properties worth in excess of £1m
•    Inheritance tax threshold (IHT) is frozen for four years, increasing IHT in real terms
•    Alcohol duties increase 2% above inflation.

And the following measures from the Pre-Budge have been confirmed:

•    1p National Insurance Contributions from April 2011
•    50% tax band for contractors earning over £150k
•    Contractors earning over £100k will see personal allowances gradually removed
•    Those earning over £130k will lose tax relief on pension contributions.

So, contractors who have yet to enter the property market will benefit from no stamp duty on properties worth up to £250,000, which will apply to this year and the next, but those with properties worth over £1m face an increased 5% stamp duty.

Tax-free ISAs will increase from £7,200 to £10,200 per year, and half can be saved in cash and will increase annually in line with inflation, allowing contractors to tax efficiently invest more of their net earnings.

Source: Contractor Calculator