Tax News - Budget Report Newsletter 2005
Good news for first-time home buyers today as Gordon Brown unveils his March budget changes.
Tax Diary March/July 2005
31 March 2005 - Deadline for small companies to incur expenditure that will qualify for 50 per cent capital allowances
5 April 2005 - Deadline for unincorporated businesses to incur expenditure that will qualify for 50 per cent capital allowances
(After these dates the first year capital allowance reduces to 40%)
1 April 2005 - Due date for corporation tax due for the year ending 30 June 2004.
5 April 2005 - Last day for organising your capital gains tax disposals to ensure you take advantage of your £8,200 exempt annual allowance.
5 April 2005 - Last day for making any exempt annual gifts for inheritance tax purposes. (Up to £3,000 per year, £6,000 if you have not used the previous tax years annual allowance.).
19 April 2005 - Last date to pay any outstanding PAYE and Class 1 NICs for 2004/05 to the Revenue. (If you pay your tax electronically the due date is 22 April 2005).
19 May 2005 - Last date to submit P14 and P35 end of year forms to the Revenue.
31 May 2005 - Ensure all employees have been given their P60s.
6 July 2005 - Ensure forms P11D(b), P9D and P11D are submitted to the Revenue.
Details of stamp duty and other tax changes are summarised in the articles that follow.
Stamp Duty changes and other Budget highlights
Stamp Duty Land Tax - great news for first-time buyers
Residential transactions:
The stamp duty land tax zero rate threshold for all residential home buyers, has been doubled from £60,000 to £120,000.
This will affect all residential property transactions from the 17 March 2005. The measure will exempt an extra 300,000 home buyers from stamp duty land tax each year.
To maintain interest in home ownership in the 2000 Enterprise areas the stamp duty land tax zero rate threshold will remain at the higher level of £150,000.
Commercial transactions - only in disadvantaged areas.
Buyers entering into a commercial land transaction in an enterprise area from the 17th of March 2005 will no longer be able to claim the disadvantaged areas relief.
The relief will be preserved for the completion or substantial performance of most contracts entered into on or before the 16th of March 2005.
ISA's - Retention of present limits for 5 years
The present ISA limits will continue to 5 April 2010. They are:
£7,000 maximum investment, £3,000 of which can be in cash.
This is a change to the existing regulations which were due to increase the ISA limits from 6 April 2006. This change will now be delayed or reconsidered after 5 April 2010.
Trusts - simplified rules
Trusts with vulnerable beneficiaries.
Backdated to 6 April 2004 the Revenue is to introduce new rules so that a trust will pay tax as if the vulnerable person were receiving the income or gains directly. In most cases this should result in a reduction in tax and an increase in the funds available for distribution to the beneficiaries.
Low income trusts
Introduction of a standard rate band of £500 which will ensure that 25,000 trustees that receive income under this amount will no longer have to submit a self-assessment tax return. This will apply from 6 April 2005.
Extension of Low Budget Film Tax Relief
The present relief will be extended to 31 March 2006.
The Revenue is also introducing measures to counter various tax avoidance schemes in respect of Film Tax Relief.
Landlord Energy Saving Allowance
This allowance will be extended from the 7 April 2005 to include expenditure on solid wall insulation.
The allowance is presently available to landlords who pay income tax and incur expenditure installing loft insulation or cavity wall insulation in dwelling houses which they let. The maximum claim per building is £1500.
Renovation Of Business Premises In Disadvantaged Areas
Revenue are proposing a new Business Premises Renovation Allowance (BPRA) which will provide a 100% first-year allowance.
The allowance will be available to any individual or company who incurs expenditure in bringing qualifying business premises back into business use. The allowance will only be available for property that has been vacant for a year or more and in one of the designated disadvantaged areas of the UK.
The commencement date of the scheme will apply once state aid approval has been granted.
Payments to employees in full-time attendance at universities and technical colleges.
There are two main changes:
- Payments of up to £15,000 (previously £7,000) for an academic year can be made tax free.
- New regulations are being introduced so that these payments can also be made free of class 1 national insurance.
The new tax and national insurance treatment will start for payments made for the 2005-06 academic year, commencing the first of September 2005.
Increased benefits for pensioners
- Winter fuel allowance 2005 £200, for over 80s, £300.
- Council tax refund £200.
- Free local bus travel in all areas.
Tax rates and allowances 2005-06
Income Tax - No change in rates of tax. Tax bands increased in line with inflation.
Income Tax Allowances - personal allowances
Single persons:
Under 65 - £4,895 (2004-05 £4,745)
Age 65 to 74 - £7,090 (2004-05 £6.830)
Age 75 and over - £7,220 (2004-05 £6,950)
Married Persons:
Aged less than 75 (born before 6 April 1935) £5,905 (£5,725 2004-05)
Aged 75 and over £5,975 (£5,795 2004-05)
(Subject to restriction for earnings in excess of £19,500 (£18,900 2004-05)
Blind Person's Allowance £1,610 (2004-05 £1,560)
Capital Gains Tax - Annual tax exempt amount.
Individuals £8,500 (£8,200 2004-05)
Most Trusts £4,250 (£4,100 2004-05)
Gains on sale of principal private residence will continue to be exempt from capital gains tax.
Corporation Tax - no changes to rates.
Inheritance Tax
The government is to increase the value of exempt estates to £300,000 over the next three years. The relevant changes are:
From 6 April 2005 the limit is increased to £275,000.
From 6 April 2006 the limit is increased to £285,000, and
From 6 April 2007 the limit is increased to £300,000.
The present limit for 2004-05 is £263,000.
Company car fuel benefit charge - will be frozen at £14,400.
Company Car Tax - minimum charge will be applied on vehicle emissions equivalent to 140 grams per kilometre of CO2.
Increases in "Sin Taxes"
From 6pm 16 March 2005:
- Cigarettes - 7p on packet of 20
- Cigars - 3p per packet of 5
- Hand Rolling Tobacco - 8p per 25g.
From midnight on 20 March 2005:
- Beer - 1p per pint
- Wine - 4p per 75cl bottle
- Spirits, sparkling wine, cider - no change
Child and Working Tax Credits
Child element of CTC will increase by £65pa to £1,690pa. Other elements of the tax credits will rise in line with inflation.
VAT Changes from 1 April 2005
Increased turnover limits for registration and deregistration:
- Registration - turnover threshold increased to £60,000. (£58,000 2004-05)
- Deregistration - turnover limit increased to £58,000. (£56,000 2004-05)
No change in 17.5% standard rate of VAT.
