Budget 2008

Personal taxation

• The basic rate of Income Tax falls from 22 per cent to 20 per cent
• The 10 per cent starting rate of Income Tax is abolished
• The personal allowance increases to £5,435; the age-related personal allowances rise to £9,030 for people aged between 65 and 74, and to £9,180 for those aged 75 and over
• The reduction in the income tax rate will increase pension contributions which are made after deduction of basic rate tax

Business taxation

• From 1 April 2008 the main rate for Corporation Tax will be reduced to 28%
• The small companies rate will increase to 21% form 1 April 2008 rising to 22% in April 2009.
• The thresholds for the small companies rate and the main rate remain at £300,000 and £1.5million respectively.
• The marginal rate of corporation tax applying to profits between £300,000 and £1.5million will be 29.75%.

• The main rate of writing down allowance for new and unrelieved expenditure on general plant and machinery including cars will be reduced from 25% to 20%.
• Writing down allowance on long life assets will increase from 6% to 10%.
• The First Year Allowance will be replaced by an annual investment allowance allowing 100% allowance of the cost of qualifying expenditure on plant and machinery up to £50,000 per annum.
• Companies that make a loss in a period in which invest in certain designated energy-saving or environmentally-beneficial plant and machinery will be able to claim first-year tax credits in respect of qualifying expenditure incurred on or after 1 April 2008.

• In January 2008 the Government introduced draft legislation to counteract cases where company distributions and partnership profits had been shifted from one individual to another who pays tax at a lower rate.
• Following a period of consultation, the Government has announced that its income shifting proposals have been delayed for one year to allow further consultation to take place. This has been welcomed by the accountancy profession who oppose the proposals as they currently stand.

VAT

• The registration threshold will rise by £3,000 to £67,000 from 1 April 2008.
• The de-registration limit rises to £65,000.
• The limit up to which errors can be corrected on VAT returns is changing for periods starting on or after 1 July 2008 and is being changed to the greater of £10,000 or 1% of net turnover.

Inheritance Tax

• Previous Budgets announced Inheritance Tax allowances - for 2008/09, the allowance is £312,000 for individuals.
• As previously announced, Finance Bill 2008 will include legislation to increase the IHT nil-rate band (NRB) available on a death on or after 9 October 2007 by the proportion of any NRB unused on the earlier death to their spouse or civil partner.

Capital Gains Tax

• The Capital Gains Tax annual exempt amount is increased to £9,600 for 2008/09 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled.
• As announced in the Pre-Budget Report, with effect from 6 April 2008 there will be a flat rate of Capital Gains Tax of 18% for all assets.

• Taper relief and indexation relief will be abolished.
• For assets held at 31 March 1982, the market value at that date will be the base cost for CGT.
• Entrepreneurs Relief will provide an effective 10% tax rate on capital gains of up to a cumulative lifetime limit of £1 million where certain criteria are met. However this relief is quite restrictive and will not apply to all situations where the previous taper relief regime applied.

Residence and non-domicile

• Days of arrival and departure from the UK will count as days in the UK for purposes of determining residence from 2008/09 onwards.
• Individuals who are not domiciled or not ordinarily resident in the UK will have to make a claim in order to use the remittance basis for their foreign income and gains. Therefore some taxpayers will now have to complete a tax return.
• Individuals who claim the remittance basis and who have been resident in the UK for 7 out of the previous 9 years will be required to pay an annual charge of £30,000 or instead be taxed on their worldwide income on an arising basis unless their unremitted foreign income and gains are less than £2,000.
• Any non-domiciled individual who claims the remittance basis will lose their personal allowance and capital gains tax allowance for any year they claim the remittance basis.

Child Benefit, Guardian's Allowance and Tax Credits

• Child Benefit for the eldest or an only child goes up 70 pence to £18.80 for 2008/09.
• For other children, the amount rises 45 pence to £12.55. Guardian's Allowance increases 50 pence to £13.45. The 'first child' rate increases to £20 a week from April 2009.
• The child element of Child Tax Credit increases by £150 a year
• The threshold for Working Tax Credit increases by £1,200 to £6,420

Pensioners

Savings

• The overall annual investment limit for ISAs rises to £7,200, of which £3,600 can be in cash, from 6 April 2008.
• The ten pence starting rate of tax is removed for non savings income and replaced with a new ten pence starting rate for savings income with a rate limit of £2,320.

Alcohol and tobacco

• Alcohol duty rates increase from 17 March 2008. The duty increases will add four pence to the price of a typical pint of beer, 14 pence to the price of a typical bottle of wine, and 55 pence to the price of a typical bottle of spirits.
• Duty on tobacco rises in line with inflation - 11 pence on a packet of twenty cigarettes.

Motoring and transport

• The two pence per litre increase in fuel duty previously announced by the Chancellor has been delayed until 1 October 2008.
• Vehicle Excise Duty (VED, or 'car tax') for the most polluting vehicles increases by £100 to £400 (for petrol and diesel cars in the graduated VED band G. Other bands see increases of £5).

The environment

• From 2009, alongside the Budget there will be a five year carbon budget setting carbon emissions; and the long-term target for emissions reductions has been increased to 80 per cent by 2050.
• Specific proposals include the introduction of legislation in 2009 to impose a charge on single-use carrier bags - the money raised would go to environmental charities.
• The Stamp Duty Land Tax exemption for zero carbon homes is extended retrospectively to new flats from 1 October 2007.

Charities and Gift Aid

• The Budget announced a package of measures aimed at increasing the take-up of Gift Aid, including the introduction of a transitional rate of 22 per cent in 2008/09.
• Measures were also taken to reduce burdens on charities, including reforms to the audit process and a programme for bringing more smaller charities into Gift Aid.