PRE BUDGET REPORT

9th December, 2009

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.

For our summary of the Pre-Budget report, please click here. This report is for guidance only and professional advice should be sought before taking any action.