Tax & Accounting News

Budget summary

21/03/2007

The Chancellor's last Budget was very much a 'give and take' affair. The giving, such as the reductions in the income tax basic rate and mainstream corporation tax rate, was loudly heralded but, following the pattern of his previous Budgets, the taking, such as the increases in national insurance contributions and the small companies corporation tax rate, was quietly hidden in the small print.

We summarise below the main points which will affect personal and company taxation. There were many minor measures which will be covered in more detail later, in our extended Budget report.

Income tax, national insurance, Working and Child Tax Credit and other rates and allowances

Most allowances and rate bands are increased by the normal inflationary amounts. However, there are higher increases for age-related personal allowances and national insurance contribution limits. The 10% income tax starting rate band will no longer apply to non-savings income. The expected increases in road tax for cars registered after March 2001 with high CO2 emissions have been introduced. Click here for full details.

Corporation Tax

The reduction in the mainstream rate from 30% to 28% will not take effect for a year, but the increase in the smaller companies rate from 19% to 20% starts on 1 April 2007!

Capital Allowances

The 50% First Year Allowance for expenditure on plant and machinery by small businesses will be retained for 2007/08. The rate for medium-sized businesses remains at 40%.

Industrial Buildings Allowances and Agricultural Buildings Allowances

Industrial Buildings Allowances and Agricultural Buildings Allowances are to be reformed. Click here for full details.

Managed service companies

The expected new rules, under which workers who use managed service companies wiill be subject to PAYE and NIC on all income they receive from the company, will come into effect on 6 April 2007. Click here for full details.

Inheritance Tax

As previously announced, the nil rate band will be increased from £285,000 to £300,000 from 5 April 2007.

Enterprise Investment Scheme, Venture Capital Trusts and Corporate Venturing Scheme

For reasons known only to himself, the chancellor made investing in these schemes more complicated and restricted. Companies will not be able to raise more than £2m per year under these schemes, and companies with 50 or more employees will not qualify. There are other minor changes. Click here for further details.

Stamp Duty Land Tax

For a 5 year period from 1 October 2007, new zero-carbon homes worth up to £500,000 will be exempt from stamp duty land tax. Click here for further details.

VAT registration

The taxable turnover level for VAT registration purposes will be increased from
£61,000 to £64,000 with effect from 1 April 2007.

Car fuel duty

An increase of 2p per litre will be deferred until 1 October 2007.

Alcohol and tobacco duties

There will be a 1p per pint increase for beer and a 5p per bottle increase for wine, but once again no increase for spirits. There will be an 11p per packet increase for cigarettes.

 

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