Summer Budget 2010 Introduction Income Tax Tax Credits and Benefits National Insurance Contributions Employees Savings Capital Gains Tax Inheritance Tax Corporation Tax Business Tax Value Added Tax Insurance Premium Tax Other Measures Tax Tables National Insurance

Savings Pension contributions (Table B) No changes were announced to the rules on pension contributions. This means that the maximum amounts for the current year remain unchanged, and extra contributions over £20,000 made by people earning over £130,000 may also be subject to a clawback of relief if made before 6 April 2011. This clawback was introduced to prevent people paying early contributions to get around the restriction of higher rate pensions tax relief for those earning over £150,000 currently planned to come into force on 6 April 2011. In spite of retaining this preliminary measure, the Government has reservations about the rule itself. Mr Osborne intends to raise the same amount of money from cuts to pension relief that Mr Darling proposed, but will discuss with interested parties whether there might be a simpler and fairer way of doing this – for example, by restricting the maximum amount that can be paid into a tax-favoured scheme to a much smaller figure (say £40,000 instead of the current £255,000). More details will be published later in the year. In the meantime, anyone paying a large pension contribution out of earnings of over £130,000 still needs to take advice to understand the tax consequences – but the rules next year may be quite different from what we were expecting. Pension Benefits Up to now, anyone with a tax-favoured pension scheme has been required to buy an annuity or start an "alternatively secured pension" (ASP) no later than their 75th birthday. An annuity may cease on the death of the pensioner or may continue to be payable to a dependant for a set period. An ASP preserves the identity of the pension fund, which may be passed on to the pensioner's dependants on death, but it is currently subject to heavy tax charges if this happens. If pension benefits have not commenced by the time an individual dies, it is normally possible to leave the fund to the dependants tax-free. The Government has announced that it will end the effective requirement to buy an annuity with effect from 2011/12. As an interim measure, the age requirement for purchasing an annuity (or starting an ASP) will be increased to 77 for anyone who has not reached the age of 75 by 22 June 2010. The IHT charges that would previously have applied on a death will be substantially reduced. Further details of these important changes will be announced shortly, and will be enacted in the legislation following the next Spring Budget. Tax Trap Take advice before fixing your pension benefits. Individual Savings Accounts (ISAs) The annual limit on investment in tax-free ISAs was increased from £7,200 to £10,200 on 6 April 2010 (6 October 2009 for those aged 50 and over). This limit is to be increased annually in line with inflation in future, starting in 2011/12. The precise amount of the increase will not be known until the retail price index for September is published, as the calculation uses the annual measure of inflation to that month. The limit will be rounded to a convenient multiple of £120 so that regular savers can fix a round monthly amount to pay into their ISA. Furnished Holiday Letting (FHL) The Chancellor confirmed that the favourable tax treatment of furnished holiday lettings, which was set to be abolished by the Labour government, will be retained for 2010/11. Compared with other rental income, FHL sources benefit from more generous relief for losses and can be used to pay pension premiums. The disposal of FHL properties enjoys a number of CGT advantages, including potentially qualifying for Entrepreneurs' Relief, which applies a lower rate of 10% on gains. The Government will consult during the summer in order to consider what the FHL rules should be in 2011/12. It seems likely that the favourable treatment will be retained (and will apply to properties anywhere in the European Economic Area), but the qualifying conditions may be tightened, for instance by increasing the number of days for which properties must be available and must be let.