PRE BUDGET REPORT 2008 – TAXATION OVERVIEW
25 November 2008
Indirect Taxes
A temporary cut in VAT from 17.5% to 15% for a 13 month period from week commencing 1st December 2008
A rise in National Insurance contributions of 0.5% coming in to force in 2011 FOR ALL EARNING MORE THAN £40,000
Direct taxes
Income tax
A new top rate of income tax at 45% on income above £150,000 per year coming into force 2011 and on Discretionary Trusts with income of more than £150,000.
Perhaps of more significance is the phased removal of personal allowances for those earning upwards to £100,000.
Personal allowances
2008-2009 2009-2010 increase
Personal allowance 6,035 6,475 440
PA (65-74) 9,030 9,490 446
PA 75 and over 9,180 9,640 460
Married (65-74) 6,535 6,865 330
Married 75+ 6,625 6,965 340
Blind person 1,800 1,890 90
Income limit for age related
Allowances 21,800 22,900 1,100
Tax bands
2008-2009 2009-2010
0 – 34,800 20% 0-37,400 20%
34,800+ 40% 37,400+ 40%
Child benefit
Now 2009-2010
1 child £18.80 £20.00
Per subsequent child £12.55 £13.20
Corporate tax
A new temporary loan fund for ‘small businesses’ to provide loans of between £1000 and £1 million from the New Year. To qualify, the applicant business need to be ‘viable’ i.e. not in default of overdraft/ bank covenants.
Planned increase in small company corporation tax (from 21% to 22%) deferred until 2010-2011
The feared new tax hitting dividend payments of husband and wife ‘Jones –v- Arctic Systems Ltd’ type companies has been deferred for now.
New ability to ‘carry back’ losses up to £50,000 to offset against previously declared profits assessed to Corporation tax – tax recovery possible for the next 3 years.
Business Payment Support Service – use the taxman as a bank – rates at 5.5% on NI, income tax, CGT and SDLT and 4.25% on Corporation tax from 6/12/08 onwards
Property
A one year holiday from the new empty buildings tax only for those with an estimated annual rental income of £15,000 or less. From April 2008 businesses have paid tax on buildings empty for more than 3 months after the Government scrapped the 50% relief enjoyed by officers and retailers and 100% relief enjoyed by industrial property
Travel
A restructure to Air Passenger Duty in 2009 so that those who travel the furthest pay the most duty – up from £10 in economy and £20 in first class for short lights to £11 and £22 for flights under £2,000, rising to £55 and £110 for flights over 6,000 miles.
Planned rise in Vehicle Excise Duty postponed, but rate still increasing – in 2009 by £5 per vehicle, from 2010 on a differential system, with the most polluting cars being taxed £30 rather than the previously announced £90
2p per litre fuel duty increase postponed in April now being brought in
Perennial favourites
30p to a pint of beer
13p to a bottle of wine
53p to a bottle of spirits
Tobacco up
Thoughts
“Companies in distress may find some comfort in the provisions if they and their advisers look carefully at what is ion offer and how to qualify. As to individuals, remember, the new 45% rate also means a 45% recover if contributions above that earning cap are diverted into pension etc. For those operating “Arctic systems” type arrangements, now is the time to look at restructuring with our company commercial solicitors and your accountants”
Edward Walter
Solicitor
Rix & Kay Solicitors LLP
The Courtyard
River Way
Uckfield
East Sussex TN22 1SL
Tel: +44 (0)1825 761555
Direct: + 44 (0)1825 744645
Fax: + 44 (0)1825 763332