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Nicole Johnson

Men in Tights?

Poor darling. It is hard not to feel for a man who has to get past a picket of unhappy public servants in order to deliver his third and very possibly his final Budget in front of a nation that is, for the third year on the trot, unhappy, pessimistic, and sceptical about the economy. And this year, particularly, the scepticism was likely to border on cynicism when it came to consideration of the motives behind his announcements.

The Chancellor was at pains to insist in the run-up to the day that the Budget would not contain pre-election giveaways, that it would be a Budget focused, rather, on harsh realities and the avoidance of a double-dip recession. And, from a tax point of view, he appeared from his speech to be almost as good as his word, with the headlining tax measure being a giveaway on stamp duty land tax for some first-time home buyers, which he stressed would be balanced by a new 5 per cent rate for higher-value homes. The speech itself was otherwise very light on detail in terms of tax measures; the real meat regarding tax was in the 71 Budget Notes issued shortly afterwards (and reproduced online). Many of these covered plans already announced in the December 2009 Pre-Budget Report or before, but there were some new measures and some changes of tack too. All of the measures are covered in the Budget Summary, and this article does not attempt a comprehensive coverage of the main measures.

Bookmakers were offering odds on the colour of the tie that Mr Darling would be wearing when delivering his speech but as far as I know there were no bets being taken on the nature or colour of his hosiery. Considering some of the tax measures announced and re-announced today, one might be forgiven for expecting to see a flash of Lincoln green on the Chancellor's ankle. Some of the measures carry a distinct whiff of Sherwood Forest, and a few of these are examined below.

Stamp duty land tax

Starting on 25 March 2010, there will be a two-year holiday from stamp duty land tax for first-time buyers, on purchases of homes costing up to 250,000. Following the perceived success of the recent holiday for residential property costing up to 175,000, which ended in December last year, this measure continues the Government's stated aim of helping more people onto the property ladder, but in a more focused way: instead of being a simple change to the SDLT threshold, the measure applies only to first-time buyers (and from the technical note issued by HMRC on Budget Day, it seems that the effective definition of first-time buyer will be a strict one), and it applies only to the purchase of property which will be the buyer's only or main residence.

Mr Darling was at pains to point out that this measure would be balanced, in true Robin Hood style, by the levying of a higher rate of SDLT on transactions in residential property costing more than 1,000,000. Such transactions will incur a charge of 5 per cent, where currently they fall into the 4 per cent top rate category for homes costing over 500,000. As this rate increase does not come into effect for completions made before 6 April 2011, legal firms' conveyancing departments may find themselves quite busy in around a year's time.

Inheritance tax

Having announced in December's Pre-Budget Report that the IHT nil rate band would be frozen at 325,000 for 201011, the Chancellor went further today: that figure will remain unchanged up to and including 201415. This extension of the freeze, we were told, will help pay for the cost of care for older people. Again, a suggestion here that there is a taking from the rich and a giving to the poor, even if no-one really buys into the implication there that somehow certain increased revenue will be earmarked for certain increased spending.

Income tax rates

Income tax rates for 201011 are to be as we have been expecting since the Pre-Budget report: the basic rate will remain at 20 per cent, with no change to the basic rate limit of 37,400, and a new 50 per cent rate will apply for taxable income over 150,000. In addition, 201011 will see the start of the tapering off of the personal allowance for adjusted net income in excess of 100,000. While those with incomes over 100,000 may not be too happy after 6 April, the other 98 per cent of the UK's earners should be whistling a relatively happy tune as they make their way to the polling station.

Savings: pensions and ISAs

The restriction on tax relief for pensions savings (basic rate relief only for those with income over 180,000, with a sliding scale for those with incomes over 150,000) was announced a year ago and will come into effect from April 2011. At the other end of the savings scale, the ISA limits will increase next month (to 10,200) and then will increase annually in line with inflation.

Small and medium-sized enterprises

Stepping just slightly beyond Sherwood Forest into the world of modern business, two important measures were announced that should be of real benefit to the smaller enterprise.

First, the Annual Investment Allowance (AIA) for capital allowances is being doubled, from April 2010, to 100,000. This 50,000 annual increase is likely to make a real difference to the smaller business considering investing in plant and machinery, effectively removing as it does the distinction, in terms of tax treatment, between capital and revenue expenditure on a doubled budget.

Second, the lifetime limit for capital gains tax entrepreneurs' relief will also be doubled from April 2010, to 2m. Again, this is intended to encourage investment in small enterprise and it is a measure that seems welcome.

Darling's last stand?

Mr Darling's Budget was his third and may have been his last. The tax measures in the 71 Budget Notes are, in general, unsurprising. There are the usual announcements about tightening up anti-avoidance rules and encouraging greener behaviour in taxpayers; there are some sensible-looking measures aimed at encouraging business investment and at stimulating the housing market, and there are a handful of changes that give tax breaks to the poorer portion of the taxpaying public, at the expense of the richer portion. We can now look forward to the hurried passage of a (we must hope, not hurriedly-drafted) Finance Bill through Parliament before the election and then, possibly, a Budget with more power to surprise later in the year.

Alison Aspin is a senior technical editor with CCH.