A freeze becomes a real term benefit? - BDO’s Response to Today’s Pre-Budget Report

Date 9 December For immediate release Subject BDO’s Response to today’s Pre-Budget Report BDO’s Response to Today’s Pre-Budget Report A freeze becomes a real term benefit? The Chancellor stated in today’s PBR that the freeze on all personal allowances for 2010/11 will still provide taxpayers with a “real terms benefit” as these allowances have not been reduced in line with negative inflation. How many taxpayers will consider this to be a benefit is easy to guess. It was announced that allowances will remain at 2009/10 levels with the personal allowance being £6,475, age related allowances £9,490 for those between 65 and 74, and £9,640 for those aged 75 and over. A freeze on personal allowances typically saves HM Treasury around £2.2bn, indeed on this basis, this would represent the largest effective tax increase after the national insurance increases. Stuart Lisle, Tax Partner, BDO LLP Southampton commented: “This measure was widely expected and the Government has claimed that the country’s negative RPI will, in real terms, mean that taxpayers still enjoy a net benefit. However, many taxpayers would have expected at least a small increase in personal allowances as some prices are still increasing such as petrol, utility bills and council tax. Arguably, this impact is likely to be felt most by families on low incomes. “In essence, freezing personal allowances is effectively a stealth tax as taxpayers focus more closely upon the rates of income tax, national insurance and VAT.” - Ends – Word Count: 214 Note to editors BDO LLP operates across the UK with some 3,000 partners and staff. BDO LLP is a UK limited liability partnership and a UK Member Firm of BDO International. BDO in Northern Ireland is a separate partnership operating under a licence agreement. BDO International is a world-wide network of public accounting firms, called BDO Member Firms. Each BDO Member Firm is an independent legal entity world-wide and no BDO Member Firm is responsible for the acts and omissions of another member. The network is coordinated by BDO Global Coordination B.V., incorporated in the Netherlands with its statutory seat in Eindhoven (trade register registration number 33205251) and with an office at Boulevard de la Woluwe 60, 1200 Brussels, Belgium, where the International Executive Office is located. The combined fee income of all the BDO Member Firms was $5.14 billion in 2008. The global network has 1,095 offices in 110 countries and more than 44,000 partners and staff provide business advisory services throughout the world. BDO LLP and BDO Northern Ireland are both separately authorised and regulated by the Financial Services Authority to conduct investment business. BDO is the brand name for the BDO International network and for each of the BDO Member Firms. Contacts Tel: 020 7983 3590/2761 Email: Charlotte.freeman@bdo.co.uk Joy.frascinella@bdo.co.uk Gill.carson@bdo.co.uk http://www.bdo.uk.com/news.html http://twitter.com/BDOaccountantPR