There was nothing terribly exciting in today’s Budget (if anything in the tax world ever is exciting?!). Losers are companies making a profit of less than £50,000 where some of the profits are left in the company. Winners are parents with lots of children.
Here’s our summary of the tax changes following Gordon Brown’s announcements today.
Headline tax rates
Income tax - allowances increased in line with inflation, no change to rates.
Corporation tax - starting rate of 0% for first £10,000 of profits increased to 19% - this impacts certain companies making profits of less than £50,000.
Booze and fags
Alcohol - extra 4p on a bottle of wine, 1p on a pint of beer, no change for spirits, sparkling wine and cider.
Tobacco - tax increased in line with inflation.
Cars
Petrol - inflationary increase in fuel duties from Sep 2006.
Car tax - a revamp of the system with tax discs costing between £nil and £210 depending on the emissions of your car.
Houses
Buying houses - no stamp duty for houses unless they cost more than £125,000 (was £120,000).
Families
Child benefit - increased to £17.45.
Child tax credit - to rise by 14% over next 3 years.
Child trust funds - extra funding of £250/£500 when child turns 7 years old.
Tax efficient investments
ISAs - no change.
EIS - maximum investment doubled to £400,000.
VCTs - income tax relief reduced to 30%.
EIS and VCTs - size of qualifying companies is more than halved to £7m of assets.
Other
Capital expenditure - first year allowances for small businesses increased from 40% to 50% for 12 months.
Minimum wage - increased to £5.35 ph.
Inheritance tax - phased increase in nil rate band from the current £275,000 to £325,000 by 2009/10.
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Inheritance tax, trusts, article in timesonline March 23 headline Inheritance trust tax grab ‘lays waste to careful plans’. Accumulation and maintenance trusts seem to have been outlawed retrospectively. Says Chancellor announced the plans yesterday (i.e. March 22).
Any comments?
From Budget Day any gifts made into any trust will be liable to Inheritance Tax (IHT) subject to the nil rate band and other reliefs. Most trusts will now fall into the IHT charging regime similar to discretionary trusts with both 10 year anniversary and exit charges. However, there are exceptions to the new rules along with transitional provisions.
Precise details are anticipated soon but it may not all be bad news as capital gains tax reliefs have been extended to transfers into trust. Therefore, the decision of which type of trust to be used may be more flexible in future.
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