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BUDGET COMMENT
There
were no great surprises in Gordon Brown’s Budget, having told us a year ago
that he was planning to increase National Insurance contributions this year.
He froze tax allowances for everyone except pensioners. Those with
children will notice a tax rise as the Children’s Tax Credit is now claimed
separately (see over).
He extended the 100% tax allowance for IT and related
communications equipment for another year and (for reasons not quite clear)
extended this to include equipment for improving efficient water usage.
A new allowance for employees working at home was
introduced - see over for more details.
Perhaps the biggest surprise was the Chancellor’s
optimism about output growth in the coming years – having had to reduce his
projections for this year and next, he has borrowed money and raised his
projection for the following year, hoping to pay it back
– sounds like a traditional cash-flow forecast – ‘jam
tomorrow’!
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Key
rates and allowances
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2003/2004
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2002/2003
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Personal tax rates – lower / basic / higher
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10%
22% 40%
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10%
22% 40%
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Basic rate / higher rate thresholds
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£1,960
£30,500
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£1,920
£29,900
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Standard tax free allowance
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£4,615
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£4,615
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Allowance for older single person (65 - 74) / (75 or over)
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£6,610
£6,720
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£6,100
£6,370
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Older married couples (65 - 74) / (75 or over) –
tax reduced by -
(NB
– only if at least one partner was born before 6/4/35)
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£556.50
£563.50
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£546.50
£553.50
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NIC threshold -
(Employer / employee)
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£89.00/wk
for both
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£89.00/wk
for both
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NIC employees / employer’s rate (not contracted out)
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11%
12.8%
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10%
11.8%
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NIC self-employed Class 2 - weekly contribution / earnings over
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£2.00
£4,095 pa.
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£2.00
£4,025 pa.
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Inheritance Tax - total tax free allowance
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£255,000
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£250,000
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Capital Gains Tax - annual tax free allowance
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£7,900
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£7,700
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VAT registration threshold - turnover in last 12 months
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£56,000
(wef. 1/4/03)
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£55,000
(wef. 1/4/02)
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Corporation tax:
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Tax rates
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0% 23.75%
19% 32.75%
30%
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On profits
between -
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£1
£10k
£50k £300k
£1.5m +
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and -
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£10k
£50k
£300k £1.5m
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Child Tax Credit –
urgent action required
If you have children aged 16 or under (or up to age
19 in full-time education), have you completed your Child Tax Credit form?
If not, you need to take action to avoid losing out.
From 6 April 2003, the new allowance replaces the
Children’s Tax Credit previously given through your tax code or tax
assessment. However, it has
to be claimed on a special form and claims can only be back-dated up to
three months, so you must take action before 5 July. Call the Helpline on 0845 300 3900 or visit the Inland
Revenue web-site at www.InlandRevenue.gov.uk to apply online.
Call us if you need any help with the forms.
Use of home as office
Self-employed people who work at home will be
familiar with this as a claim in their accounts.
The Chancellor announced that employers will now be able to pay
their employees up to £2/week tax free if they have to carry out any
duties at home.
If you have employees who do any work at all at
home, save them and you tax and NIC by paying this much of their wages as
‘use of home’ allowance.
The amount can be more if more can be justified
(eg someone who works only at home).
However, all claimants, both employed and self-employed, need to beware
of the tax implications of having space at home (eg an office) used purely
for business purposes – when the property is sold, a proportion
of the gain could be subject to capital gains tax.
VAT Flat-rate scheme
This scheme allows you to
simply add up your sales and pay a fixed percentage over the to VAT
office. No claim is made for
VAT on purchases and expenses, because the rate is set according to the
type of business, intended to take account of the input tax that would be
claimed under the normal system.
Businesses up to £150k
turnover (exc VAT) can apply to use the scheme.
The intention is to save
time and cost and, for those struggling with a paper system, it would
certainly do that. However,
there is the risk that your actual outgoings are higher than the
‘industry norm’ and you could end up paying more VAT than you would
otherwise.
Of course, if you have
unusually low outgoings for your type of business, you may profit from
paying less VAT. If you would
like us to run some comparisons for you, please contact us.
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Company vans – closing the loop-hole
Tax
on company cars is now so high that for many, the tax is more than the
value of the benefit. However,
company vans are very cheap on tax, adding only £500 to the user’s
taxable income, ie a maximum of £200 in tax.
Pick-up
trucks are considered to be vans, even where they are like luxury cars
inside, where they can be shown to be ‘work-horses’ for the business.
This
has been exploited by those able to make such use of their vehicles, but
the Chancellor announced that he would be clamping down on this.
Full
details were not given, but beware of the likelihood of something for next
year.
Company
cars and fuel
As
from 6 April 2003, fuel provided for private use in company cars is taxed
on the basis of CO2 emissions.
The charge is based on the same percentage as for the car benefit,
but applied to a notional value of £14,400 for this tax year.
For
example, a car with CO2 emissions
of 175g/km will have a percentage of 19% (see Tax Data Card for details),
so producing a fuel benefit of £2,736.
PAYE end of year forms
If
you have employees or subcontractors from whom you deduct tax, you must
submit your end of year P35 (CIS36 for subcontractors) by 19 May 2003 at
the very latest to avoid a penalty.
If
you would like our assistance with the forms, please contact us.
The
penalty for being late is £100 per month, so it can very quickly become a
serious situation.
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