Financial Monitor (December 2006)
Chancellor’s pre-Budget report
Our December edition of Financial Monitor concentrates on the pre-Budget measures announced by Gordon Brown on 6 December.
Income Tax Personal Allowances
The Chancellor announced the level of personal allowances which will apply in the tax year 2007/08. He proposes to increase the personal allowances for those aged under 65 by £190 to £5,225. The allowances for those aged 65 to 74 will rise by £270 to £7,550 and for those aged 75 and over will rise by £270 to £7,690. The higher personal allowances for those aged 65 and over will be reduced where income exceeds £20,900 (currently £20,100).
The married couples’ allowance which is only available to those born before 6 April 1935 will increase to £6,285 (currently £6,065) and to £6,365 (currently £6,135) for those aged 75 and over. The married couples’ allowance will continue to attract tax relief at the rate of 10%.
The tax bands for 2007/08 have not yet been announced.
National Insurance contributions
There are no changes proposed to national insurance rates. The amount of earnings below which no NIC is payable by employers and employees is increased by £3 to £100 per week and the upper limit for 11% employees’ national insurance is increased from £645 to £670 per week. Class 2 contributions paid by the self-employed will increase by 10p per week to £2.20 per week. The self-employed will also pay 8% Class 4 contributions on earnings between £5,225 and £34,840 (currently £5,035 and £33,540) and 1% on earnings above £34,840.
Construction Industry Scheme.
The standard deduction rate for those not eligible for gross payment will rise from 18% to 20% from 6 April 2007. The higher deduction for ‘unverified’ subcontractors will be 30%.
Managed service companies
Managed service companies are currently used in a wide range of sectors from teaching and health care to contract cleaning. They enable workers to be paid in a mixture of salary and dividends thus avoiding tax and national insurance and also enabling higher tax free payments than normally obtained by employees to be paid for travelling. The Government proposes new legislation, effective from 6 April 2007 which will require managed service companies to operate PAYE on all payments to workers however described other than legitimate expense claims which would be tax free if the worker was directly employed by the end client.
Individual Savings Accounts (ISAs)
The tax advantages of ISAs are to be made permanent and subject to confirmation there are proposals to:
- maintain the annual investment limit of £7,000 at least
- bring the old Personal Equity Plans within the ISA regime
- remove the distinction between Mini and Maxi ISAs
- allow the transfer from the cash component of the ISA into the stocks and shares component without utilising part of the annual allowance.
Child benefit
Child benefit is raised in line with inflation. From April 2009 there will be additional support for all families, with every expectant mother becoming eligible for child benefit from week 29 of her pregnancy.
Air Passenger Duty
The rate of duty will increase from 1 February 2007. The rate for travel within Europe will increase from £5 to £10 in the lowest class and £10 to £20 in other classes. The rate of duty for destinations outside Europe will increase from £20 to £40 in the lowest class and £40 to £80 in other classes.
National Minimum Wage
The Government is determined to more strictly enforce the national minimum wage and for 2007/08 will increase by 50% the resources allocated to tackle non-compliance and may charge penalties to the non-compliant.
Landfill tax
The standard rate of landfill tax will increase by £3 to £24 per tonne from 1 April 2007.
VAT fuel scale charges for company cars
The current VAT scale charges for private fuel will be replaced by a scale which reflects the car's carbon dioxide emissions from 1 May 2007.
Company Accounts and Returns
The new Companies Act will reduce the time allowed to file accounts at Companies House to nine months for private companies and six months for public companies. The timetable for implementation has not yet been agreed but will not apply to accounting periods ending before 1 October 2007.
In addition the Government wants to provide, by 2010, the facility for companies to file their accounts online with the Registrar of Companies at the same time as they file their corporation tax returns online whilst paying their corporation tax electronically.
The Government has also agreed to link the one year Revenue enquiry window to the date the corporation tax return is filed rather than twelve months from the latest filing date as now.
Tax payments for individuals and partnerships
Please remember your balancing income tax payment for the tax year 2005/06 and first payment on account for 2006/07 are due on 31 January 2007. If you are not sure what is due to be paid and have not received a demand by 15 January 2007 please contact our tax department for assistance. If you are likely to have difficulty making the payment due by 31 January please contact the Collector of Taxes (Receivables Management) in advance of that date to make arrangements to pay by instalments. This can only be arranged for those genuinely unable to make payment of the amount due. The telephone number is 012367 36121 for those in the Sheffield area.
Christmas Greetings
The team at Wingfield Slater wishes you a very Happy Christmas and a Prosperous New Year.
Our offices will be closed on 25 December, 26 December and 27 December 2006 and 1 January 2007.
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