2008 Budget

Below is a summary of the 2008/09 tax rates announced in today’s Budget speech

Income tax
0% income tax on first £5,435
20% income tax on earnings from £5,435 to £41,435 (0% effective rate for dividends)
40% income tax on earnings in excess of £41,435 (25% effective rate for dividends)

Self employed National Insurance
Class 2 increases to £2.30 per week
The threshold when class 4 NICs reduce from 8% to 1% is now set at £40,040 (this is a massive increase of £5,200 from the previous year)

Capital gains tax
Annual exemption increases to £9,600 (0% tax on gains up to this level)
10% tax rate of first £1m of lifetime gains from the sale of business assets
18% tax rate for all other gains

Pensions
Annual allowance is now £235,000
Lifetime allowance up to £1.65m

Company tax
21% tax rate on profits up to £300,000 (20% previously)

VAT registration limit
Increased to £67,000 turnover in a 12 months period (previously £64,000)

Capital allowances
100% allowance on asset spend of up to £50,000 per annum
20% allowance per year for all other plant and machinery assets
If the remaining balances on previously purchased assets are less than £1,000 these can now be written off in full

Inheritance tax
Exemption up to £312,000 per person or £624,000 per couple

ISAs
Cash allowance £3,600
Shares allowance £7,200
Total maximum allowance £7,200

Other
Alcohol duty increases by 4p per pint of beer
Tobacco duty up 11p per pack of cigarettes
Petrol increases by 2p per litre from 1 October 2008

2007/08 tax return deadlines
31 October 2008 for paper returns
31 January 2009 for online returns

Income shifting
Proposed rule changes have been delayed until 2009. Income shifting is when taxable income is moved into the hands of a spouse/relative paying tax at a lower rate.

Umbrella companies
HMRC will look closely at the expenses that freelancers claim when working via an umbrella company. This is in response to reports that excessive claims have been made in the past.

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