Budget Seminar - 14 March 2008

THE BUDGET - MARCH 2008

A BUDGET OF MIXED BLESSINGS

Eacotts reviews Darling’s tax changes at post-Budget seminar

The Chancellor’s March budget was a mix of good and bad news for business and individuals.   No change in the rules for allocating family firms’ profits, a low ‘Entrepreneurs’ rate for capital gains, and some new measures to support  companies’ finances, on the one hand, but, at the same time, sharp increases in a range of taxes.   

A briefing on these and a host of other detailed points contained in Alistair Darling’s 12th March Budget was held at a lunchtime seminar hosted by Eacotts on Friday 14th March at the Burnham Beeches Hotel.  Eacotts partners Jeffrey Smith and Martin Gatehouse and Tax Manager Guy Sterling were the presenters.  Over forty people attended, including Eacotts clients and several contacts from local banks and other professional firms

A major announcement in the Budget was the deferment of the previously signalled clampdown on husband and wife firms that split the income generated from their businesses in order to reduce their joint tax bills.

Alongside a new general flat rate of capital gains tax of 18 per cent and the ending of taper relief and indexation allowances on April 6^th 2008, small firms were granted a lower ‘entrepreneur’ rate of 10 per cent for the first £1m of gains accrued over a person’s lifetime.

Other significant announcements affecting businesses included:

• Corporation tax for firms with profits of more than £1.5 million is reduced from 30% to 28% but for small companies the rate rises from 20% to 21%
• VAT threshold rises from £64,000 to £67,000
• A new Annual Investment Allowance giving 100% write-off against profits for up to £50,000 spent on plant and machinery
• Existing writing down allowances for plant and machinery reduced from 25% to 20%
• A new writing down allowance category of 10% for ‘integral features’ in a building 
• Capital allowances for company cars will be based on carbon emissions from April 2009
• the  small firms loan guarantee scheme will be extended to ‘growing businesses’ more than five years old, backed by increased funding

Major changes on the personal tax front included:

• A reduction in the basic rate of income tax from 22% to 20%, but with an ending of the current starting rate of 10%
• A significant rise in national insurance payments for employees and the self-employed, with the upper earnings limit rising to an annual figure of £40,040.
• An annual tax charge of £30,000 for non-domiciled UK residents if they wish to avoid being taxed on their worldwide income and gains (but with some relaxations made on the original proposals)
• A rise in the annual limit for gaining tax relief under the Enterprise Investment Scheme from £400,000 to £500,000.
•  Increase in the investment limits for ISAs

Accompanying  these business and personal tax changes were sharp rises in excise duties on beer, wine, and cigarettes.  Duty on fuel will rise by 2p in October.  The government pledged to raise taxes on alcohol by 2% above the rate of inflation annually for the next four years.

Following the presentations on these Budget announcements, Eacotts partners and managers talked with guests over a buffet lunch to help answer individual questions and offer guidance on points arising. 

Full details about the contents of the Budget are available on our website

17 March 2008