Taxing Times Ahead – beware the 6th April 2008!
| On the 6th April 2008 the tax system in the UK saw a number of radical changes. Businesses and individuals have been given prior warning, but has the message been clear enough?
TaxAssist Accountants has the following advice to offer... If you are in business, have complex personal tax affairs, or have a low income, you will be affected by a number of changes next year. In particular: |
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- Income Tax Rates – Although the basic rate of income tax is dropping from the present 22% to 20%, the existing starting rate of 10% is to be abolished. Individuals on low incomes will pay more tax as a result.
- Pension Contributions – An unwelcome effect of the lower basic rate tax rate is a lowering of total contributions to your pension scheme. At present if you pay £78 into your scheme the Government will top up the contribution with the basic rate tax deducted, £22. Total contributions invested £100. After the 5 April next year you will need to increase your contributions to £80 per month, tax top up £20, to achieve your £100 total investment.
- Capital Gains Tax – The present indexation and taper relief are to be scrapped and replaced with a single tax rate of 18%. If you have owned business assets (shares in your own company for example), for a number of years, you will likely suffer a higher tax charge if you dispose of those assets. There will be winners and losers.
- Family Businesses – If you have a family owned company or partnership the Revenue are introducing legislation to stop the arbitrary sharing of profits and dividends just to save tax. You may be asked to justify the underlying commercial reasons for the way in which income is allocated to family members, particularly husbands and wives in the 2009 Budget.
The changes to Capital Gains Tax and the ‘shifting of income’ between family members will have far reaching consequences for owners of small businesses. There is no point in waiting until it is too late to take action. For instance anyone who owns assets that would be subject to capital gains tax if sold now, should seek professional advice – there may still be strategies that can be implemented that overall will save you tax.
For further information please call 0800 0523 555 to be put in contact with your local TaxAssist Accountant or complete our contact form.
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