Business Alert - April

Aide memoir: new tax rates for the new tax year.

04.04.2008

Aide memoir: new tax rates for the new tax year.

Changes for the New Tax Year: An aide memoir.

The Chartered Institute of Taxation has published a summary of the changes that will come into force in April 2008 to corporate, business, personal and indirect taxes. A list of the key changes (from 6 April except where highlighted) is below.

If you are in any doubt about what impact the changes may have on you or your business please contact your Scott-Moncrieff adviser or one of our tax partners:

You may have missed…

  • Budget 2008 – comment, analysis and the key changes announced last month by the Chancellor.
  • Tax Rates 2008-2009 – download our tax rate card for the financial year ahead.

 

Income tax  

  • Abolition of 10% starter rate (apart from on savings income for those on modest incomes).
  • Reduction in basic rate from 22% to 20%.
  • Increase in personal allowances for those aged 65+, from £7,550 to £9,030, with a £10,000 level the target from 2011.
  • Exemption from benefit-in-kind charge on overseas properties owned by individuals through their own companies (effectively in place already but to be formalised following consultation). Residence and domicile changes - £30,000 charge for using the remittance basis after 7 years' residence; per-sonal allowances lost for using the remittance basis immediately.

NICs

  • Upper earnings limit (UEL) increased from £670 pw to £770 pw, meaning that the 11% NIC rate ap-plies to annual incomes up to £40,040. The aim is the UEL will reach parity with the 40% income tax threshold from 2009.
  • Introducing a new 'upper accruals point', at which entitlement to state second pension stops accru-ing, at a similar level to the current UEL. 
    Investments.
  • ISA limit rises from £7,000 to £7,200 with the cash component rising from £3,000 to £3,600.
  • Introduction of (non-repayable) dividend tax credit for dividends from non-UK companies.
  • Enterprise investment scheme limit raised to £500,000. 

Employment

  • Benefits charges on most company cars rise as CO2 ratings are adjusted.
  • Fuel benefit rises as the 'multiplier' up from £14,400 to £16,900. 

Capital Gains Tax  

  • 18% flat rate of tax.
  • Abolition of taper relief and indexation allowance.
  • Introduction of entrepreneurs' relief (£1m lifetime allowance). 

Inheritance tax

  • Transferable nil rate bands for spouses/civil partners (from 9 October 2007).
  • Nil rate band rises to £312,000; then £325,000 for 2009/10 and £350,000 from April 2010. 

Corporation tax (CT) (changes from 1 April)

  • Main CT rate reduces from 30% to 28%.
  • Small companies' rate increases to 21% (and 22% from April 2009).
  • Increased research and development (R&D) credits to 130% (large companies) and 175% (Small and medium sized enterprise (SMEs) - subject to state aid approval). 

Capital allowances (changes from 1 April for companies, 6 April for income tax)

  • Industrial/agricultural/hotel buildings allowances are reduced to 3%, on the way to their disappearing from 2011.
  • General rate of plant and machinery allowances falls from 25% to 20%.
  • Long life asset rate increases from 6% to 10%.
  • 'Integral features' (as defined) qualify for 10% allowances.
  • 100% annual investment allowance on first £50,000 of expenditure. 

Business rates (from 1 April)

  • Empty rates on unoccupied offices and shops double (up from 50% to 100%), and empty rates are being imposed for the first time on unoccupied factories and warehouses (up from 0% to 100%). 

Indirect taxes (mostly from 1 April) 

  • Landfill tax rises from £2/£24 per tonne to £2.50/£32.
  • Aggregates levy rises from £1.60 to £1.95 per tonne.
  • Climate change levy rates up in line with inflation.
  • Vehicle excise duty rates increase from 13 March.
  • Air passenger duty: standard rate for business class only flights from November 2008; change to per plane basis from November 2009.
  • Alcohol duties increased (from 17 March) and tobacco from 12 March. 

Stamp duties

  • Elimination of stamp duty where the charge would be £5 or less (from 13 March).
  • Relief from SDLT on zero-carbon flats (from 1 October 2007). 

Benefits

  • Increases to tax credits, pensions and child benefits. 

HMRC powers  

  • Confirmation of start date of new penalty regime (returns for periods starting after 31 March 2008).
  • New powers of inspection, entry, set-off and various other matters from 2009.

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