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Tax Changes in this Year’s Budget

A large number of changes to varying tax regimes were announced in the 2008 Budget, with many of them coming into force on April 6th 2008.  The main tax changes are outlined below.

Personal Tax
The 10% starting rate has been abolished, with the basic rate of income tax falling to 20% from 22%.  The top rate threshold will rise to £43,000 from 2009.

The new personal allowances are as follows:

The flat rate of National Insurance Contributions (NICs) for the self-employed will rise to £2.30 per week.  The upper earnings limit will rise from £670 to £770, meaning that individuals will have to earn an extra £100 before the funds are taken out of NIC requirements.

Inheritance Tax (IHT)
The IHT threshold will rise to £312,000 for the tax year 2008-2009, rising again to £325,000 for 2009-2010 and again in 2010-2011 to £350,000.  This means that estates are exempt from IHT up to those amounts in the corresponding tax years.

Capital Gains Tax (CGT)
The major overhaul of the Capital Gains Tax will undoubtedly affect business owners disposing of their assets.  The taper and indexation reliefs have been abolished, and replaced with a flat rate of 18% tax on all capital gains, effective from 6th April 2008.  The new Entrepreneur’s Relief has been introduced, again effective from 6th April 2008, which effectively allows a £1million lifetime allowance at which capital gains on business assets are taxed at the lower 10% rate.

Individual capital gains tax exemption for the 2008-2009 tax year is increased to £9,600 from £9,200.

Corporation Tax
The rate of tax businesses are required to pay on their profits has changed.  The main rate of tax has dropped to 28% from 30%.  This is effective on profits over £300,000.  For companies with smaller profit margins, the rate has risen to 21% from 20%.

Rather than one or two major new legislations being drafted, this year’s Budget has been one of minor but significant changes.  It’s important to get in touch if you require professional advice on how the changes will affect them.

This article has been provided by UK200Group.

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