Waveney McKenna

The budget was always going to be unfriendly to those on higher incomes, as Jacqui Smith must have mentioned a dozen times following the Chancellor's statement - the burden will fall on those with broader shoulders.

Whether you agree or not the measures are aimed at those on higher earnings with the main strategy being to hope for growth in order to balance the books. A summary of the main points follows:-

- Inheritance tax nil rate band frozen at £325,000.

- Personal Allowances frozen.

- National Insurance will increase by 1% from 2011 with the starting threshold increasing to £20,000.

- 50% tax paid on bonuses over £25,000 applies to banks and building societies. This appears to be a tax liability paid by the bank with the bonus then subject to PAYE as usual.

- Stamp duty holiday stops 1st January 2010 and VAT increases to 17.5%.

- Bingo tax reduces to 20% from 22% having been increased from 15% in 2009.

- Additional measures to curtail the use of trusts in inheritance tax planning where the settlor retains a future interest.

- Any individual earning over £130,000 will now have to add their employer pension contribution to calculate total income for assessment against the £150,000 threshold to see whether this will trigger restrictions on higher rate tax relief.

- And - don't forget the tapered loss of the personal income tax allowance for those earning over £100,000. 

It is important to note that many of these changes are due to commence in another year or two. With a general election likely in May 2010 some of these measures may change prior to the start date. Those hoping that a new Government will be able to make significant changes may be disappointed, the public financial situation is bad and future Governments are going to have to raise significant additional revenue even if the economy returns promptly to reasonable levels of growth.

Please note that this summary is based on our understanding of HM Revenue and Customs, future changes to legislation cannot be predicted. Whilst we believe this information to be accurate we cannot guarantee it.