We are pleased to provide the following update on matters already reported for the new tax year and as announced in the Chancellor’s March 2010 Budget and subsequent selected government press releases.
To download a PDF copy of this report please click here
We also take this opportunity each year to make some practical points and important reminders within the matters reported.
These changes apply from 6 April, unless otherwise stated.
Income tax rates and allowances
| Starting rate for savings |
£0 - £ 2,440 |
10% |
(No change) |
| This is for savings income only and does not apply if your total taxable income is above that limit |
| Basic rate |
£0 - £37,400 |
20% |
(No change) |
| Higher rate |
£37,401 - £150,000 |
40% |
|
| Additional rate |
Over £150,000 |
50% |
|
Rates differ for dividends (10%, but 32.5% & 42.5% charged to higher and additional rate tax payers respectively)
In practice, individuals in receipt of dividends from UK companies pay no tax personally on them, unless their total gross income including dividends exceeds the higher rate tax threshold. Higher rate tax will then be paid on dividends exceeding this threshold at an effective rate of 25% of the net dividend for 40% taxpayers and 36.11% for 50% taxpayers.
The higher rate tax threshold will be met where gross income exceeds £43,875 in the current year.
Personal tax allowances
| Personal allowance up to age 65 |
£6,475 |
(No change) |
The level of weekly pay under tax & NIC thresholds will stay at £110 from 6 April 2010
|
| Personal allowance 65 to 74 years |
£9,490 |
(No change) |
| Personal allowance age 75 onwards |
£9,640 |
(No change) |
The personal allowances for those aged 65 and above are reduced £1 for every £2 of income over a limit of £22,900, until the basic allowance is reached.
Tax relief restricted to 10%
| Married couples allowance age 75 and over |
£6,965 |
This relief is reduced £1 for every £2 of income over £22,900, as above, down to a minimum Married Couple’s Allowance of £2,670.
Capital Gains Tax
| Capital Gains Tax rate |
18% |
The Capital Gains annual exemption remains at £10,100.
This applies separately to each spouse or civil partner and children
Entrepreneurs Relief
Gains from the sale of a business and assets thereof from 6 April 2008 onwards are taxed at an effective rate of 10% subject to a lifetime limit of gains of £1 million. That cumulative limit has been increased to £2 million for disposals after 5 April 2010.
Car and car fuel benefits
The benefit for the use of a company car will continue to be calculated based on the CO2 emissions of the vehicle. Accordingly, car benefits are calculated (for cars registered from 1 January 1998) as a percentage (calculated by reference to the car’s published CO2 emissions) of the original list price.
Emissions information for cars may be obtained on www.smmt.co.uk
Percentages with reference to CO2 emissions may be viewed on our Tax Rates
Discounts apply to certain environmentally friendly cars.
A 10% rate applies to non-electric cars with emissions at 120gm/km or less.
The list price is reduced for capital contributions towards the cost of the car up to £5,000.
Older cars are taxed by reference to standard percentages of original list price, based on engine capacity.
Those directors and employees who will renew their cars in the coming year should bear this in mind and talk to us about the effect of the above tax charges, if this is of interest. Obviously tax savings can be made by having a company car, which produces low CO2 emissions. Also the car benefit rates are such that it is often more tax effective for Directors of owner-managed companies, who perform a reasonable amount of business miles, to own their car personally and charge the company a tax-free mileage allowance.
Car fuel benefits are also taxed according to CO2 emissions. The benefit is therefore calculated by multiplying £18,000 by the appropriate percentage that applies for car benefit. The car fuel benefit arises if the employer pays for any private fuel on company cars in a tax year.
Users of a company van (private use available)
| Benefit charged |
£3,000, plus £500 if any private fuel is provided |
A nil charge will apply if the employee only uses the van for home to work travel, but is not allowed any other private mileage, apart from the odd trip say to the tip with private items.
Employers should document the fact that employees have been instructed that no private use is permitted and take steps by checking the odometer etc to ensure no private mileage is undertaken, if the benefit charge is to be avoided.
Tax free mileage allowances
| First 10,000 business miles in tax year |
40p per mile |
| Additional miles |
25p per mile |
| Plus additional 5p per mile for passengers who are making the same business trip. |
| Motorcycles |
24p per mile
|
| Bicycles |
20p per mile |
Corporation Tax rates
Financial year 1/4/10 to 31/3/11
| Up to taxable profits of £300,000 |
21%
|
| Next £1,200,000 |
29.75%
|
| Over £1,500,000 |
28% |
Capital Allowances
100% relief on expenditure in the year on plant & machinery up to the Annual Investment Allowance of £100,000.
This is increased from £50,000 for assets bought after 5 April 2010 (31 March 2010 for companies).
The temporary first year allowance of 40% on the balance of purchases in excess of the Annual Investment Allowance is no longer available for assets purchased after 5 April 2010.
20% writing down allowance is available on brought forward balances.
10% writing down allowance applies to integral features and long-life assets.
Remember that the full allowance is due for the year of purchase, even if the equipment is purchased on the last day of your accounting period. If your accounting year end is approaching and you intend to purchase some equipment shortly, it would be better to purchase this before your year end, in order to receive the allowance a year earlier, but take care if you exceed the annual investment allowance in the current year and would enjoy more relief at 100% in the next year.
Cars
From 6 April 2009, new rules applied to tax relief for depreciation on cars, based on Co2 emissions. Cars with emissions at 160g/km or less will attract an allowance of 20% per annum, whereas those with emissions above that level will only attract relief at 10%. Cars are included in the normal general pool or the special rate 10% pool and accordingly there is no restriction on cost (previously £12,000) and there will not necessarily be a balancing adjustment on disposal. However, cars with private use will continue to be identified separately. Motor cycles are excluded from similar treatment and will enjoy 100% relief within the Annual Investment Allowance. For leased cars a flat rate disallowance of 15% is made but only on cars over the 160g/km limit.
Value Added Tax
Main rate 17.5% (15% 13 months to 31 December 2009)
From 1 April 2010 the V.A.T. Registration Threshold will be increased from £68,000 to £70,000 and the deregistration threshold will rise from £66,000 to £68,000.
The flat rate scheme for VAT continues to be available for businesses with a turnover up to £150,000. In the scheme, such businesses could elect to calculate their VAT in a simplified way, based on a percentage of turnover.
Apart from simplifying matters, a business could potentially make a VAT saving if the percentage applying to their type of business meant reduced VAT charges, compared with their normal payment level. If you feel the above may be of benefit, we can advise further.
Please remember to apply the VAT fuel scale charges where the VAT on fuel is being reclaimed and there is some private use of the vehicle. The tables determining the scale charge you should apply will change with effect from 1 May 2010. These rates can be found at HM Revenue & Customs
The turnover threshold for the cash accounting scheme remains at £1,350,000. The scheme should be exited if turnover exceeds £1,600,000. On voluntary exit or exit due to exceeding the threshold, there is a period of grace of 6 months before the cash basis has to be abandoned.
National Insurance
The weekly threshold before NIC is charged on employees remains at £110.
Those paying, for example, wife's wages below the NIC threshold should bear this limit in mind.
Employers National Insurance remains at 12.8% and also applies at the starting point of pay of £110.01 per week (No upper limit).
Employees NIC remains at 11% (up to an upper limit of weekly pay of £844) and employees paid above the upper limit are charged a further 1% on the balance of their pay over £844.
Remember Employers NIC is payable on most benefits in kind and is subject to a separate return to H M Revenue & Customs, based on benefits calculated on forms P11D.
The basic self employed NIC contribution remains at £2.40 per week (normally
paid monthly by direct debit).
Not payable on profits less than £5,075 per annum.
The additional Class 4 NIC for the self employed is charged along with your tax liability at 8% on profits between £5,715 and £43,875. Plus a 1% charge on taxable profits in excess of £43,875.
See our budget headlines for increases to NIC which apply from 6 April 2011.
Construction Industry Scheme
The rate of tax deducted at source from subcontractors is 20%.
The rate of 30% will be deducted from unregistered subcontractors.
Individual Savings Accounts (ISA's)
Overall annual investment limit£10,200
Cash limit included within max.£5,100
See our budget headlines for future increases
National Minimum Wage
From October 2009
| For workers aged 22 and over |
£5.80 per hour |
| Workers aged 18-21 inclusive |
£4.83 per hour |
| For 16 and 17 year olds |
£3.57 per hour
|
Inheritance Tax threshold
| Estate valued up to £325,000 |
0% |
| Over £325,000 |
40% |
Stamp Duty/Stamp Duty Land Tax
| Transfer of shares and securities |
0.5% |
Stamp Duty Land Tax
| Transfer of property |
All land/property
|
Disadvantaged areas |
| |
Residential |
Non-residential |
Residential |
| £0 - £125,000 |
0% |
n/a |
n/a |
| £0 - £150,000 |
n/a |
0% |
0% |
| £125,001 - £250,000 |
1% |
n/a |
n/a |
| £150,001 - £250,000 |
n/a |
1% |
n/a |
| £250,001 - £500,000 |
3% |
3% |
3% |
| Over £500,000 |
4% |
4% |
4% |
There is a new temporary increase to the residential threshold from £125,000 to £250,000 for first time buyers for two years from 25 March 2010.
See Tax Rates
Please make sure you have completed your Tax Credits claim for those with children aged 16 and under. This can be done on-line at www.hmrc.gov.uk. Working Tax Credit is also available to low earners and is assessed using the same Tax Credits claim form.
The above represents general advice and individuals should always seek specific advice concerning their own particular affairs before proceeding.
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