A summary of the main tax announcements in the 2008 budget report, combined with 2008/09 tax measures announced previously in the 2007 budget and pre-budget reports.
Highlights:
***
Income Shifting
- The chancellor announced that the proposed legislation will be reconsidered and enactment is postponed for a year. More
***
Company and business taxation
- Changes to associated company rules to exclude business partner's controlled companies
- Simplification review
- The rules by which goods appropriated into and out of trading stock are adjusted to market value becomes statutory
From 6 April 2008 as previously announced in the pre-budget report:
simplified.
- The mainstream rate of corporation tax will be cut from April 2008 to 28%.
More details on company and business taxation
***
Residence and non-domicile tax
Some small but practical changes to the proposed reforms which will apply from 6 April 2008 include:
- The non-domiciled tax charge of £30,000 will only apply to adults (and not children) who continue to use the remittance basis and remain UK residents, having been UK residents for more than seven of the past ten years.
- The remittance basis applies automatically to non-domiciled individuals who have unremitted foreign income and gains in excess of £2,000 a year (deminimis was to have been £1,000).
- Day counting tests for residence have been amended so that physical presence in the UK at midnight counts as a whole day, but the rules are modified for those in the UK on transit.
- The employment related securities rules in Part 7 of ITEPA 2003 will now apply to employees who are resident but not ordinarily resident in the UK.
- There are anti-avoidance measures which cover remittances. More
From 6 April 2008 other provisions are as previously announced in the pre-budget report:
- These include, major changes to the remittance basis, who can claim the remittance basis, restrictions on personal allowances, and tightening up of the day counting residence rules.
***
HMRC’s existing Extra Statutory Concessions are to be made statutory.
This has been long overdue following the decision in the Wilkinson case.
Source: BN95
***
Capital gains tax
No new measures were introduced, but further examples of the new entrepreneur’s relief have been published.Capital Gains Reform
From 6 April 2008 as previously announced:
- Taper relief and indexation will no longer apply to gains which will be taxed at a single rate of 18 % tax on chargeable gains after reliefs and the annual exemption.
- A new relief Entrepreneurs relief reduces tax rates on disposal of relevant businesses and assets used in a business.
***
Personal tax rates and allowances
Far from simpifying tax rates, the chancellor has performed something of a juggling act with rates, bands and allowances, making manual tax calculations devilish.
Income tax rates
From 6 April 2008 as previously announced in the pre-budget report:
- The 10% starting rate band is abolished for earned and pension income from 2008, but
- the 10% starting rate remains for savings and dividends
- Basic tax rate reduced to 20%
- Dividend rate remains unchanged 10% and 32.5%,
- Basic rate tax band increased by indexation, and from 2009/10 will be increased by £800
- Top rate band of income tax to rise to £43,000 by 2009
National insurance
An extra increase on top of that previously announced by Gordon Brown is caused by an adjustment (rounding up) for indexation.
From 6 April 2008:
- The upper earnings limit for employees increases by £5,200 (previously announced as £3,900) or £100 p.w. (£75 p.w.) to £40,040.
- The class 4 lower limit increases by £210 to £5,435 and the upper limit correspondingly increases by £5,200 to £40,040
***
Tax administration
Reform and realignment of powers, deterrents and safeguards continues and as already announced there are major changes to the penalty system, and appeals process
More
From 6 April 2008 as previously announced in the pre-budget report:
- The threshold will rise from £500 to £1000 for taxpayers making payments on account (POA) of their annual income tax liability under the self-assessment system from 6th April 2009.
- Paper returns for 2007/08 are due by 31st October 2008 and on-line by 31st January 2009.
- The SA enquiry window will be aligned with the filing date.
- For CTSA the enquiry window will be aligned with the actual date of filing from 2008 (with the exception for large groups).
- Penalties for incorrect returns: New provisions set for 2008 in line with the consultation proposals in "Powers, deterrents and safeguards" to penalise according to the amount of tax understated and taxpayer behaviour.
***
Employee benefits, expenses and taxes
The Enterprise Management Incentive (EMI) investment limit increases from £100,000 to £120,000.
***
Capital allowances
From 6 April 2008 as previously announced in the pre-budget report:
- Measures already announced for 2008/09:
- Allowances on long life assets to increase from 6% to 10%.
- Integral fixtures to become as long life assets and subject to 10% allowance from 2008, subject to consultation
- Phased removal of IBAs and ABAs by 2011.
- An annual investment allowance (AIA) of £50,000pa to replace first year allowances (FYA) for small and medium sized business.
- A reduced short life writing down allowance on the general pool from 25% to 20%
- A payable tax credit for losses incurred on "green technologies" - subject to consultation on proposed design and scope.
- Extention of capital allowances to expenditure on building regulations in response to a notice from the Fire Authority repealed. More
***
Research and development
From 6 April 2008 as previously announced in the pre-budget report:
- An enhanced deduction for small companies from 150% to 175%
- Large company deduction increases from 125% to 130%
***
VAT
- Registration threshold rises from £64,000 to £67,000 from 1 April 2008.
- The turnover limit for deregistration will be increased from £62,000 to £65,000.
- Exemption for fund management from 1 October 2008 to delete trust-based schemes and add closed-ended investment entities
- Indirect tax returns: correction of errors: The £2,000 limit increased to the greater of £10,000, or ii) 1 per cent of turnover, subject to an upper limit of £50,000.
- Fuel scale charge will increase significantly for accounting periods beginning on or after 1 May 2008.
- Reduced rate retained on smoking cessation products
- Transitional period for claims for periods between 1 April 1973 and 1 May 1997 - before they become subject to the three-year time limit.
- Option to tax: some simplification from 1 June 2008 and other administration improvements.
- Withdrawal of the Staff Hire Concession. More
***
Landlord’s energy saving allowance
No further announcements made.
From 6 April 2008 as previously announced in the pre-budget report:
- Availability of the allowance extended until 2015
- Will apply to corporate landlords, providing State Aid clearance obtained
***
Stamp duty land tax (SDLT)
The minimum £5 stamp duty on instruments transferring stocks and shares will be abolished from 13 March 2008.
There were various announcements notifying changes for shared ownership schemes, notification, leases, zero carbon, administration and of course, anti-avoidance measures…More
From 6 April 2008 (and in this case earlier) as previously announced in the pre-budget report:
- Relief from SDLT for new zero carbon homes to apply from 1st October 2007.
***
Anti-avoidance
Recent budgets have contained an ever-increasing swathe of anti-avoidance measures, and this year's was no exception and specific schemes located under the disclosure regime were targeted. More
***
Savings, investments and pensions
- Enterprise Investment Scheme limit on which an investor can claim income tax relief in any one year increased from £400,000 to £500,000.
From 6 April 2008 as previously announced in the pre-budget report:
- Increasing cash ISAs limit to £3,600, stocks and shares ISA limit £7,200. Max. overall £7,200 p.a.
- Foreign property ownership: Legislation enacted in FA 2008 to ensure that individuals purchasing property overseas via a company will not suffer a benefits charge as "shadow directors".
- Non-repayable tax credits to be accounted for on foreign dividends providing shareholder owns less than 10% of the overseas company and less than £5,000 in dividends from those companies
***
Green/Eco/Carbon taxes and allowances
- Vehicle excise duty will be reformed in 2009, with the introduction of new taxation bands to encourage drivers to choose cleaner cars.
- Capital allowance treatments for company cars to be linked to carbon emissions from April 2009: 160g/km+ cars to attract 10% writing down allowance (WDA) sub 160g/km models will attract 20% WDA. More
- 100% first year capital allowances (FYAs) extended to low carbon-emission (<110g/km) company cars and new category of water-saving equipment. More
- FYA for biofuel & refuelling plant extended for five more years.
- Tax on plastic bags to be introduced in 2009, with money raised going to environmental charities.
- Aeroplane tax will replace Air Passenger Duty More
Motor vehicles, vessels and airplanes
Fuel duty will not increase by 2p per litre on 1/4/08 as previously announced.
From 6 April 2008 as previously announced in the pre-budget report:
***
Budget 2008 coverage sponsored by
You might also be interested in
Replies (2)
Please login or register to join the discussion.
Mr F
Took sometime to work this one out - indexation appears to justify the extra..
NIC
"National insurance
From 6 April 2008 as previously announced in the pre-budget report:
Upper earnings limit raised by £75 by 2008 and aligned with higher rate threshold by 2009.
Class 4 upper profits limit increases by £3,900"
This does not tally with the tax rate tables or what was announced yesterday, and noone seems to have noticed yet unless I've gone barmy.
UEL was increased by £100 and Class 4 profits limit by £5200 (i.e. £25 more per week than previously announced.)