Pre Budget Review 2009

As Pre-Budget reports (PBR) go, it was relatively predictable, with a scattergun of largely superficial (except for those specifically hit!) headline-grabbing initiatives, which will hardly have any effect on the juggernaut of debt that is careering towards us.

Doing anything about that juggernaut at this time would potentially threaten the fragile state of the economic recovery. Given the necessary balancing act, and the fact that the General Election will have occurred before the substance of most of the initiatives are enacted, we got what we all expected, a political PBR.

The drive on tax investigations continues, particularly into overseas bank accounts and is expected to raise £5bn of taxes, including monies raised from penalties for future non disclosure of offshore bank accounts.

So a political PBR, but actually given the size of our national debt, it will be a major surprise if any government of whatever hue does much to reverse the revenue raising initiatives that have been proposed.

Our review highlights the key changes and offers up potential actions that you ought to consider with your usual tax adviser. The most urgent actions are shown in red. Download our updated Pre Budget Review here

• Economy forecast to shrink 4.75% in 2009, worse than 3.5% forecast in April
• Growth of 1%-1.5% expected in 2010 and 3.5% in 2011 and 2012
• Forecast borrowing of £178bn in 2009, £3bn higher than predicted in April
• Estimated borrowing of £176bn in 2010 and £140bn in 2011, falling to £96bn in 2013
• Budget deficit to be halved by 2013
• Estimated public cost of bank bailouts cut from £50bn to £10bn
• Total spending in 2010-11 to rise by £31bn.
• Current spending to fall by 0.8% between 2011/2 and 2014/5
• One-off 50% tax on discretionary bank bonuses of more than £25,000 per individual
• Inheritance tax nil rate band to be frozen at £325,000 until 2011
• VAT to return to 17.5% from 15% from 1 January 2010- No other changes to VAT
• Employees and employers national insurance rates to rise by 1% from April 2011
• Increase in corporation tax for small businesses to be deferred
• Stamp duty holiday on certain residential properties to end on 1 January 2010
• Under-24s to be guaranteed work or training after six months out of work
• Basic state pension will rise by 2.5% in April 2010
• Child and disability benefit to rise by 1.5% in 2010
• Contributions to public sector pensions to be cut by £1bn a year
• All public sector pay settlements to be capped at 1% for two years from 2011
• Bingo duty to be cut from 22% to 20%
• £160m investment in low-carbon and renewable projects
• £200m additional investment for Warm Front insulation scheme, helping 65,000 households
• Boiler scrappage scheme for 125,000 households
• Electric cars to be exempt from the company car tax regime for five years
• New 50p tax on landline phones to pay for super-fast broadband
• New 10% tax rate on income from patents to boost science development from April 2013
• Free school meals to an extra 500,000 low income families

A more in depth analysis and action points will follow in our Pre-Budget Review.

Download our updated Pre Budget Review here (High Res)
Download our updated Pre Budget Review here (Low Res)

Download the 2009-10 tax card here

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Our Budget Review publication provides a reminder of the measures announced in April’s Budget with a particular emphasis on those areas where we recommended that action should be taken by the end of your financial year. It is not too late to take action!