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We have highlighted key changes below. For more details click here KEY CHANGES COMPANIES / EMPLOYERS GOOD NEWS
BAD NEWS
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INDIVIDUALS GOOD NEWS
BAD NEWS
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COMPANIES / EMPLOYERS National insurance A 1% rise in both employers and employees national insurance cost. The 1% increase on employees has no upper limit for the first time. This is the most significant change in the budget, announced in the November pre budget speech, this will significantly increase the costs to employers and employees alike.
It is important to remember that the Class 1A and 1B rates (tax payable on employee benefits such as cars and fuel–due 19th July 2003) will remain at 11.8% for 2003. Corporation tax rates These have remained unchanged for the year commencing 1st April 2003 Capital allowances First year allowances of 100% have been extended to 31st March 2004 on purchases of:
This means that the whole cost of purchasing the above equipment can be set against company profits in the year of purchase. First year allowances of 100% are still available on the purchase of energy saving investments. This includes the purchase of cars whose CO2 emissions are 120g/km or less. Normally the allowance is restricted to 25% (or £3,000 whichever is lower) on cars. The number of cars that comply with this requirement are low at present and mainly include Smart cars but Daihatsu, Honda and Toyota have all recently brought out models that fit the criteria. Also included in energy saving investments is the purchase of energy efficient boilers, heat pumps and refrigeration units. First year allowances of 40% are available on the purchase of all plant, including vans. At present double cab pickups with a payload greater than 1 tonne are classed as vans and are subject to this 40% allowance. The Inland Revenue is currently looking at the tax treatment of all vans and these allowances are likely to change in future years. VAT The registration/deregistration limits have increased by £1,000. Authorised mileage rates These remain unchanged for the year commencing 6th April 2003
If these mileage rates are used to reimburse staff then they are allowable against profits of the company and not taxable in the hands of the employee. No P11D (declaration of benefits) is necessary if these are the only benefits received by an employee. Stamp duty There has been no change in the rate of stamp duty on the purchase of property but 1% is now payable on commercial leases with a value greater than £150,000. There are certain disadvantaged areas that are exempt from this duty, the most local being in the Leeds/Bradford area. Please contact us for specific locations. In the 2002 budget it was announced that by 2010 all companies must file their payroll end of year returns electronically. In order to encourage early take up of this amongst small companies the Inland Revenue will make incentive payments to all qualifying employers as follows:
INDIVIDUALS Income tax The starting rate, basic rate and higher rate are unchanged on the previous year. Personal allowances The tax free allowance for those under 65 has remained unchanged. There are small increases for those individuals over 65. Child tax credit Awards are now based on the income of the family (not the higher earner as previous) so a couple where only one parent works is treated in the same way as a couple where both parents work. The credits are based on joint annual income from 6th April one year to 5th April of the next year. The credits must be claimed separately from the tax return system and can be backdated for only 3 months. It is important therefore to claim NOW to obtain your full entitlement. The tax credit will be paid directly to the main carer in the family and rates for 2003 are as follows:
Child trust fund In a new scheme to be introduced in 2005, for each child born from September 2002 an initial amount of £250 (£500 for children from families who qualify for full child tax credit) will be provided from the government. Additional contributions may be made by family and friends up to an annual limit of £1,000. The funds will be accessible only when the child reaches the age of 18, at which time there will be no restriction on the use of the money in the fund. More details will be published in the summer of 2003. Home working Where employees work from home under agreed flexible working arrangements the employer can pay £2 per week towards costs incurred at home, without supporting evidence, free of tax and national insurance. Employer provided vans At present there is a benefit on employees, who take their vans home, of £500 and no fuel benefit even if private mileage is paid for by the employer. The government is intending to reform these rules and it is expected that in future years the benefit will be based on emissions, as with company cars. A consultation document will be issued in due course. Company Cars The taxable benefit on company cars and private fuel is increased as the emissions criteria is tightened.
Annual staff parties Employers may now pay up to £150 per head for staff parties with no tax consequences. Taper relief The qualification criteria for business assets are to be relaxed. From 6th April 2004 any asset ( other than shares or securities) used wholly or partly in a trade will be treated as a business asset irrespective of whether the actual owner of the asset is involved in the trade.
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