Speak to your regular contact at EBS for a personal summary of how the Emergency Budget may affect you. The following provides a simple summary of yesterday’s announcements:

Tax & National Insurance

• The basic personal allowance will increase to £7,475 from 6th April 2011
• The basic rate tax threshold will reduce to restrict the benefit of the increased personal allowance to lower earners
• Subsequent reviews will work towards increasing the personal allowance to £10,000
• April 2011’s 1% increase in NI contributions will still apply though the impact on employers will be reduced by the creation of an increased secondary threshold
• The impact can be reduced by using salary sacrifice
• From midnight on 22nd June 2010 a new 28% rate of Capital Gains Tax applies to individuals paying higher rates of income tax. This may warrant of a reviewof the most suitable product wrappers to hold collective investments
• ISA limits will increase annually in line with inflation from 6th April 2011

Pensions & Retirement Planning

• A full review of pensions tax relief from 6th April 2011 has been announced. The anti-forestalling measures introduced last year which run until 5th April 2011 still apply
• It is expected that the review will recommend a reduced annual allowance for pension contributions which would preserve some entitlement to higher-rate tax relief on pension contributions for all. (Analysts anticipate an allowance in the region of £30,000-£45,000 pa)
• From April 2011 the rule requiring pension scheme members to purchase an annuity by age 75 will be reviewed and has been extended to age 77 effective immediately to cover the review period
• As expected it was announced that action will be taken against trusts and similar arrangements used to reward employees and avoid income tax & national insurance. It was confirmed that this action includes Employer Financed Retirement Benefit Schemes, also referred to as Employee Benefit Trusts, from April 2011
• References to the National Employment Savings Trust (NEST) suggest that the Coalition will progress with auto-enrolment of employees into pension arrangements
• Higher rate pension tax relief at some level remains available for everyone until 5th April 2011, speak to EBS for personal information

Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HMRC practice, which is subject to change. This has been provided for information only and should not be construed as advice. EBS will publish a more detailed summary of the 22nd June 2010 Emergency Budget on this site and can provide a personal assessment of the Budget’s impact on request.

Download our Budget Summary guide here.

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