Pre Budget Report - Dec 2008
You may be aware that the Chancellor made a number of changes in his pre-budget report on 24th November.
Should you require any further information or help regarding the Chancellors budget changes then please call us. Any extra advice and guidance we can offer may make all the difference to you, your business and any future plans you might have.
Income Tax Rates 2009-10
The amounts of income tax personal allowances and the rates and rate bands will have effect on and after 6th April 2009.
| 2008-09 | 2009-10 | |
| Basic personal allowance | £6,035 | £6,475 |
| Personal allowance for those aged 65 to 74 | £9,030 | £9,490 |
| Personal allowance for those aged 75 and over | £9,180 | £9,640 |
| Blind person's allowance | £1,800 | £1,890 |
| Married couple's allowance | £6,625 | £6,965 |
| Income limit for age-related allowances | £21,800 | £22,900 |
| Minimum amount of married couple's allowance | £2,540 | £2,670 |
| Basic rate limit | £34,800 | £37,400 |
| Starting rate limit for savings income | £2,320 | £2,440 |
The basic personal allowance provides an amount of tax free income. All individuals entitled to the basic personal allowance receive the same amount. From 2010-11, the basic personal allowance will be subject to income limits of £100,000 and £140,000.
If an individual's gross income is above the income limit of £100,000, the amount of their allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.
If an individual's gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.
Trading Loss Carry Back for Business
A measure was introduced to extend the ability for businesses to carry trading losses back against profits of earlier years to get a repayment of tax. This gives more flexibility for business with losses.
It applies to companies with accounting periods ending between 24th November 2008 and 23rd November 2009 and other businesses relating to the tax year 2008-09.
Under current rules businesses already have a number of mechanisms to ensure tax from profitable years is repaid through set-off against losses that arise in subsequent periods when times are harder.
Firstly, businesses can offset unlimited trading losses against profits in the preceding year and thereby reclaim tax previously paid. Secondly, start-up unincorporated businesses in the early years of operation can carry trading losses back for three years. Thirdly, any business ceasing to trade can also carry trading losses back for three years and lastly, ongoing trading losses can be offset against profits in future years.
The proposed revision will apply for one year and will extend the period that current trading losses from businesses can be carried back against previous profits, from the current one year entitlement to a period of three years, with losses being carried back against later years first.
The amount of losses that can be carried back to the preceding year remains unlimited. After carry back to the preceding year, a maximum of £50,000 of the balance of unused losses is then available for carry back to the earlier two years.
Pensioners
The basic state pension will increase to £95.25 per week in April 2009, this is the October 2008 inflation increase. In addition, each pensioner will receive a one off payment of £60 in January 2009, to effectively give all pensioners the benefit of the increase from January.
The Pension Credit minimum income guarantee also increases to £130 for individuals and £198.45 for couples for 2009/10.
2008 Tax Returns
If we still have not received your papers for the preparation of your 2008 Return, please let us have these as soon as possible to enable us to consider the minimising of your tax position fully. We would like to thank those of you who brought your papers into us earlier this year.
Corporation Tax Small Companies Rate
The planned increase of the small companies' rate (SCR) of corporation tax from 21% to 22% from 1st April 2009 has been deferred until 1st April 2010.
Pension Schemes: The Lifetime Allowance and Annual Allowance from 6 April 2011
Tax-relieved savings in a registered pension scheme for an individual is subject to an overall limit called the lifetime allowance (LTA). This was set at £1.5 million when it was introduced in April 2006 and will rise to £1.8 million in 2010-11. The annual contributions limit on which tax relief can be claimed is called the annual allowance (AA). This was set at £215,000 when it was introduced in April 2006 and will rise to £255,000 in 2010-11.
As a result, the 2010-11 LTA of £1.8 million and the AA of £255,000 will continue to apply, with their rates held constant, for a further five tax years i.e. up to and including the tax year 2015-16.
Tax Credits Rates
Families claiming Child Tax Credits - child element of the award is increasing to £2,235 per child from April 2009, an increase of £150 from £2,085 in 2008/09.
The other elements of the tax credits award for both child tax credits and working tax credits are increasing in line with inflation.
The increase to the child benefits rates will be paid from 5th January 2009 instead of 6th April 2009. The new amounts payable will be £20.00 per week for the first or only child and £13.20 per week for subsequent children.
To see more articles, see these pages: