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The Budget

Alistair Darling announced his Budget on Wednesday 12th March.

As a result of the early announcements in October and difficult economic conditions, the Budget contained few surprises. We were expecting changes to the Inheritance tax regime and to Capital Gains tax, and that is exactly what we got.

Inheritance Tax - The 2008/09 inheritance Tax nil rate band is now £312,000. Importantly, up to 100% of the unused proportion of a deceased spouse's (or civil partner's) nil rate band can be claimed on the death of the survivor - provided this occured on or after 9th October 2007.

Capital Gains Tax - The 2008/09 CGT exemption will be £9600. Most radically, gains can no longer be indexed or tapered, meaning that tax will be due on the whole of the gain over the exemption. Some good news however, is that a flat rate of 18% will be in place for all - this may please those subject to high rate tax on gains. The chancellor also announced the availability of " Entrepreneurs' Rrelief " on disposals of trading businesses and shares and securities of a qualifying trading company.

The budget also announced a lower rate of basic rate income tax (to 20%) but all but abolished the lower rate (10%) tax bracket. Stamp duty was left unchanged, save for relief on zero-carbon flats and the ISA allowance for 2008/09 was increased to £7200 (of which £3600 can be cash). Investors who withdrew cash from their Northern Rock ISAs between 13th and 19th September 2007 can reinvest the amount withdrawn into any new cash ISA by 5th April 2008 without affecting their allowances.

Although basic rate tax relief on pensions is now 20% as opposed to 22%, high rate tax relief is still available at 40%.

The largest single tax-raising measure announced on budget day was the increase in alcoholic duties at 6% above inflation. Taxation on the most polluting cars has also been increased significantly.

For further Budget information, click on the PDF file below.
Buget 2008 PDF