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We have highlighted key changes below. For more details click here For tables of rates and allowances for 2004/05 and 2003/04 click here KEY CHANGES COMPANIES / EMPLOYERS GOOD NEWS
BAD NEWS
THINGS TO REMEMBER FROM PREVIOUS BUDGETS
INDIVIDUALS GOOD NEWS
BAD NEWS
COMPANIES / EMPLOYERS National insurance There was no rise in the rate of national insurance and the earnings thresholds have been increased (see rates and allowances for details) Corporation tax rates These have remained unchanged for the year commencing 1st April 2004 but an announcement was made in that distributed profits of close companies (most small companies) must be subject to corporation tax at 19%. As a result those companies with a taxable profit of less than £50,000 and who distribute all profits as dividends will have an increased corporation tax charge of up to £1,900 per annum. Reform of corporation tax Further detailed proposals will be published later this year but it is thought that whilst the Government will retain the capital allowance system it is likely to be modernised. Capital allowances First year allowances of 100% on information and communication technology have been abolished. 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. The list of qualifying assets is due to be extended in the summer of 2004. General first year allowances have been increased to 50% (previously 40%) and are available on the purchase of all plant, including vans. Loans to shareholder directors of close companies The Government are considering further anti-avoidance measures where loans are made to shareholder directors of close companies. Construction industry scheme The tax treatment of certain payments made within the construction industry will change from 6th April 2006. VAT The registration/deregistration limits have increased by £2,000. Authorised mileage rates These remain unchanged for the year commencing 6th April 2004
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. INDIVIDUALS Income tax The starting rate, basic rate and higher rate are unchanged on the previous year. Personal allowances Tax free allowances for all individuals have increased. 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. From 6th April 2005, a nil charge will apply to employees who take their van home and are not allowed other private use. Where private use is unrestricted, the benefit in kind charge will be £500 (£350 for older vans). From 6th April 2007, the discount for older vans will be removed and the scale charge for unrestricted private use will increase to £3,000 (and if private fuel is provided by an employer an additional fuel charge of £500 will apply). Company Cars The taxable benefit on company cars and private fuel is increased as the emissions criteria is tightened.
Employer supported childcare From 6th April 2005, employers can pay employees a childcare payment of up to £50 per week free of tax and national insurance. This relaxes the previous conditions that needed to be met to qualify for exemption. To benefit from the exemption, the childcare benefit must be available to all employees and the employer must contract with or provide vouchers to pay an approved child carer. Self-assessment tax returns From April 2004, a new four page self-assessment tax return is to be introduced. The intention is to reduce the compliance burden for tax payers with simple affairs including;
Jointly owned property From 6th April 2004, dividends from shares in close companies jointly owned by a married couple will be taxed on the husband and wife according to actual ownership rather than in equal shares. Help for pensioners A £100 payment is to be made to pensioner households with someone aged over 70 (on 26th September 2004) to help with their council tax bills. Landlords From 6th April 2004, landlords subject to income tax on rental income will be able to claim a deduction of up to £1,500 for the costs of installing loft or cavity wall insulation in a dwelling house which they let. Inheritance tax (IHT) The death rate remains at 40% and the tax free threshold has increased to £263,000 for charges arising after 6th April 2004. Except for the largest estates, an IHT account will normally be required only where there is tax to pay. A £3,000 penalty will be charged for failure to submit an IHT account within 12 months of the account being due. Pension arrangements From 6th April 2006 the Government proposes a new tax regime for pensions. The key feature of these proposals is to introduce a lifetime allowance for tax-approved pension savings. The allowance has been set for the first 5 years as follows:
Other features include:
Earnings limit From 6th April 2004 the earnings limit for pension calculation purposes will be £102,000. Previous budget summaries can be found by clicking on the links below:
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