Tax changes from April

by Richard Allum on 8 February 2008

Although the new tax year does not commence until 6 April, with the next Budget due on 12 March, there are already a number of changes which will take effect.

Some changes are quite dramatic, such as changes to Capital Gains Tax with the new 18% flat rate. There has been some softening for business owners who own a ‘material stake’ in their business for which the 10% tax rate will apply on gains up to £1m but there is still a lot of dissent over this issue. Perhaps there will be some changes in the Budget.

This, along with the changes to Inheritance Tax, awaits ratification within this year’s Finance Bill so there is ample opportunity for things to be changed.

In the meantime, the following lists some of the more important changes that will take effect or are currently planned.

  • 10% Income Tax band: Cannot be used against earnings.
  • Basic rate tax: Cut to 20%. This will reduce the amount of pension tax relief for all except higher rate taxpayers.
  • Foreign dividends: For total foreign dividends of less than £5,000, 10% notional tax credits will generally apply.
  • Income shifting: New rules apply to application of profits within partnerships and payment of company dividends (particularly targeted at husband and wife remuneration strategies).
  • Upper earnings limit for National Insurance: £100 a week increase to £770.
  • Capital Gains Tax: 18% flat rate, end of indexation and taper relief.
  • Inheritance Tax nil rate band: Rises to £312,000.
  • PEP and ISA rules converge:More on this to come.
  • ISAs: Contribution limit rises to £7,200, mini/maxi distinction disappears.
  • Small companies 2008 Corporation Tax rate: Rises to 21%.
  • Mainstream 2008 corporation tax rate: Cut to 28%.

One or more of the above are likely to have an impact on the reports you are writing or clients you are working with. More detailed articles will follow shortly in the run up to the Budget.

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