Emergency Budget Highlights 2010

Following a review, the newly appointed Chancellor George Osborne delivered an Emergency Budget on 22 June 2010.

Some of the key announcements are outlined below.

Value Added Tax (VAT)
As widely anticipated, an increase in the standard rate of VAT was confirmed, and will see the main rate rising from 17.5% to 20% on 4 January 2011. The move is expected to raise more than £13 billion a year by the end ofthe Parliament.

Capital gains tax (CGT)
A new 28% top rate of CGT has come into effect for gains realised after 22 June 2010, where an individual has total taxable income and gains of more than the basic rate limit for income tax (£37,400 for 2010/11). The lifetime limit for Entrepreneurs' Relief, which reduces the effective CGT on qualifying gains to 10%, has been raised from £2 million to £5 million.

Personal allowance
With the aim of protecting lower earners from the squeeze, the income tax personal allowance will rise to £7,475 in April 2011, removing around 880,000 people from the requirement to pay any income tax. However, higher rate taxpayers will be prevented from reaping the benefits of the changes by means of a reduction in the basic rate limit for 2011/12.

National insurance contributions (NICs)
Employers will see an increase in the threshold at which they start to pay national insurance contributions, which will rise by £21 a week above indexation. In addition, qualifying new businesses in targeted areas of the UK can now enjoy a national insurance 'holiday' of up to £5,000 for each of the first 10 employees hired within the first year of business.

Corporation tax
Corporation tax will be reduced to 27% from April 2011, with a further series of 1% cuts taking place each year until the rate reaches 24% in 2014. The small profits rate will also be cut from 21% to 20% from April 2011.

Small business finance
In a bid to improve access to finance for small businesses, a new Enterprise Capital fund of £37.5 million has been introduced, and the Enterprise Finance Guarantee is providing £200 million of additional lending until 31 March 2011.

Other announcements included a series of proposed changes to capital allowances to take effect from April 2012, plans to replace Air Passenger Duty with a per-plane aviation duty, and the creation of the new Office of TaxSimplification.