2008 Budget Snap Shot - 12 March 2008
12 March 2008
In Alistair Darling’s Debut Budget today the key tax issues are the following:
- Significant changes to capital gains tax with indexation allowance and taper relief being withdrawn from 6 April 2008 and a single rate of CGT of 18% being introduced.
- The introduction of “entrepreneurs relief” which will mean an effective rate of CGT of 10% on gains up to £1,000,000 on the disposal of trading businesses and shares in a trading business.
- From 6 April 2008 the basic rate of income tax has been reduced from 22% to 20%. There will be a new 10% starting rate for savings income only, with a limit of 2,320. If an individual’s taxable non-savings income is above this limit then the 10% savings rate will not be applicable.
- Corporation tax rate for small companies will increase by 1% and will be 21% from April 2008 and planned to increase to 22% in April 2009.
- From 1 April 2008 the full rate of corporation tax will be cut from 30% to 28%.
- New rules on the way in which capital allowances can be claimed. There is to be a new Annual Investment Allowance where you can claim 100% of expenditure on plant and equipment up to an annual limit of £50,000. Writing down allowances on plant and machinery will be cut from 25% to 20% and on certain fixtures integral to a building will be cut from 25% to 10%.
- Phased withdrawal of Agricultural Buildings Allowances and Industrial Buildings Allowances from 6 April 2008. For 2008/2009 the rate will be 3%, for 2009/2010 2% and for 2010/2011 it will be 1%.
According to Brian King, Tax Partner at Chartered Accountant, Ellacotts LLP:
“The Chancellor confirmed recent proposals on capital gains tax reform which will have a significant impact. Individuals who dispose of non-business assets, such as let properties, are likely to benefit from the new single rate of CGT of 18%. Individuals who meet the criteria for “entrepreneurs relief” will be satisfied that their effective rate of CGT on gains up to £1,000,000 will be limited to 10%. The likely losers of these reforms will be farmers who dispose of farmland that does not constitute the whole or a significant part of their business. Under guidance currently available it is unlikely that such a sale will qualify for “entrepreneurs relief” and the gain will be taxed at 18%. Under the current CGT regime the effective rate of CGT for farmers was significantly lower after taking into account indexation allowance and taper relief.”
Brian King goes on to say: “In recent Budget’s the finer points of the proposed changes in tax legislation has been buried deep in Budget notes and accompanying documents that are released after the Budget. It is necessary to review these documents in detail, in order to establish if there are significant proposals that did not get mentioned in the Chancellor’s speech.”
If you have any queries concerning any of the above mentioned issues, or would like advice on the best possible course of action in particular areas, please contact Brian King, Tax Partner at Ellacotts LLP on 01295 250401 or e-mail bking@ellacotts.co.uk.
