·
Well it’s election year and
the chancellor has exercised his right to bribe everyone who might vote New
Labour with promises that sound rather better than reality.
·
We await the patter of tiny feet
in the Brown household – possibly in 2003 when the bulk of his maternity
measures take effect.
·
As usual the budget contained
a sly dig at traditional enemies of the socialist movement – banks are no doubt
to be punished for the various monopolies they are deemed to operate and
legislation to curb the professions (but presumably not the lawyers donating to
the socialist cause) is to follow.
These days
so many of the tax and benefit changes are pre-announced that it is worth reprising
the existing measures that come into effect during the next year, although some
have been slightly changed in the Budget. Some people will not live to see all
of the changes announced in the current budget (no matter how young they are)
·
From April 2001 a children’s tax credit of £520 will be
introduced. This will be gradually withdrawn where one or both of the parents
is a higher rate taxpayer. From April 2002 an
additional credit of £520 will apply during the year in which a child is born.
·
The working families’ tax
credit introduced in October in conjunction with the national minimum wage
currently ensures an income of £214pw and this will increase to £225pw from
October 2001 (couple with one child)
·
The Climate Change Levy is
introduced from April 2001 and there is a corresponding reduction in employers’
rate of national insurance to 11.7%.
·
Road fuel taxes are reduced
in accordance with the policy of appeasing protestors
·
The minimum wage is to be
increased to £4.10 per hour from October 2001. The youth rate will be announced
later in the year.
·
The upper earnings limit for
employees NI increases to £575pw while the nil rate band is aligned with the
personal tax threshold (at £87pw)
·
The lower rate of Vehicle
Excise Duty will, from July 2001 (but back-dated to November 2000), apply to
cars below 1,500cc. New cars are subject to a 4 band system based on carbon
dioxide emissions
·
The standard rate of Landfill tax increases from £11 to
£12 per tonne from 1 April 2001. It
continues to increase by a further £1 per tonne in each of the next three years
·
For pensioners the winter
fuel allowance was increased to £200 and the basic state pension increases by
£5 (couples £8) per week with a minimum income guarantee of £92.15 (couples
£140.55)
·
The ISA contribution limit
continues at £7,000 until 2006.
·
The cash and annual
accounting schemes for VAT will both have an increased turnover limit of
£600,000pa from April.
·
With-holding tax on royalties
between companies paying corporation tax is abolished from April 2001
·
Some initiatives have clearly
failed, one being the so called “universal bank account” which will only come
about with severe arm-twisting.
·
From 6th April
2001 all payments of pension premiums (NOT retirement annuities) will be made
net of tax relief at the basic rate.
For the self-employed this will have an effect on payment of tax since
the relief will have been wholly or partly obtained at source
·
The basic personal allowance
is increased in accordance with inflation to £4,535.
·
The personal allowances for
pensioners have been increased to £5,990 (aged 65-74) and £6,260 (75 and over),
the income limit for age related allowances rises to £17,600.
·
The 10% band has been
extended by £380 to cover the first £1,880 of income. Higher rate tax starts at
£29,400 of taxable income.
·
Details have been announced
of the revised car benefits scheme based on carbon emissions to be introduced
from April 2002, a Ford Focus (emitting <165g/km) will attract the lowest
rate of 15% and a Rolls Royce the highest rate of 35% - although the RR will
benefit from the upper limit of £80,000 on cost.
·
The tax-free rates for
business mileage will change significantly from 2002, to a single set of rates
of 40p for the first 10,000 miles and 25p thereafter. To encourage multiple use
employers will be able to pay an additional 5p per mile for carrying business
passengers on the same journey.
·
The earnings limit for
personal pensions is increased to £95,400.
·
An accelerated tax credit (150%)
is to be introduced in respect of expenditure for cleaning up contaminated
land.
·
There are various technical
changes to NI rules that basically bring the treatment of benefits and expenses
into line with the tax treatment.
·
All
employee share ownership plan – rules on stamp duty are changed to avoid a
double charge.
·
Enterprise
management incentive, the limit on the amount of shares in issue under the
scheme has been increased to £3m and the restriction on the number of employees
lifted. There are other technical amendments to ease the administrative burdens
of the scheme.
·
Corporate
Venturing tax relief , EIS and VCT are amended so that all the funds raised
need not be used within 12 months, 80% must be used with 12 months and the
balance within the following year. Other changes mean that EIS relief may not
be lost when a company ceases to be unquoted.
·
The
relief for investment in films which was to expire on 1st July 2002
has been extended to 1st July 2005.
·
The
annual exempt amount is increased to £7,500 for individuals and £3,750 for most
trustees.
·
Taper
relief is extended at the business assets rate to the employees of non-trading
companies provided they do not hold a material interest (>10%)
·
Retirement
relief continues to be phased out over a period of five years. The exempt and
half-exempt amounts for 2001/02 are £100,000 and £300,000 respectively.
·
Enhanced (i.e.100%) allowances
are available on energy saving plant and machinery. The details are available
at http://www.eca.gov.uk. It is worth
considering this since items such as lighting and air conditioning systems are
eligible.
·
The European Commission has
declined to consider the case for reducing the rate of VAT on maintenance and
repairs of listed buildings used as places of worship. To disguise this rebuff a system of grants
is to be introduced that will effectively reduce the VAT cost from 17.5% to 5%.
·
An exemption will be made for properties in
disadvantaged areas.
·
Registration and
de-registration thresholds are £54,000 and £52,000 respectively from 1st
April 2001
·
The refurbishment and
conversion of properties empty for more than 3 years, non-residential property,
flats above shops and the conversion of a dwelling to a care home or for
multiple occupation will be subject to VAT at the reduced rate of 5%
·
Regulations are to be introduced
to ensure museums and galleries that provide free admission can recover VAT on
their expenses.
·
Adult cycle helmets are to be
zero-rated and children’s car seats rated at 5%. In addition the rules on
children’s clothing are amended to recognise that children are larger (fatter?)
than they used to be.
· The value of corporate gifts that may be given in any year has been increased from £10 to £50
· The nil rate band for inheritance tax is increased by £8,000 to £242,000 from April 2001.
· Investment and Property Investment LLPs are defined in a similar manner to the corresponding companies in order to restrict their use as vehicles for tax planning, among other measures interest on borrowings to invest in such an LLP will not attract tax relief.
· A levy of £1.60 per tonne on the extraction of aggregates will be introduced from April 2002, this will be balanced by a 0.1% reduction in employers NIC
· The Minimum Funding requirement for pension schemes is to be abolished but will be replaced with further bureaucratic requirements.
·
The selection of tax credits
(principally it seems a device to redefine social spending as negative
taxation) is to be extended to pensioners at some indeterminate future date.
·
Maternity pay will be
increased to £75pw in 2002 then £100pw in 2003 and the period of payment
extended from 18 weeks to 26 weeks. A
two-week period of paid paternity pay will be introduced at the same rate.
·
The duties on tobacco have
been increased by the rate of inflation. This increases the cost of a packet of
20 cigarettes by 6p.
·
Road fuel duties are reduced
in line with previous commitments, by 2.35p per litre for ultra low sulphur and
unleaded petrol (until 14th June) and by 3p per litre for ULS
diesel. LPG is similarly reduced by 3p per litre and the duty frozen in real
terms until 2004
·
Duties on alcohol are
frozen – party party!! Also the government is “minded” to reduce the rate of
duty paid by small brewers – even better!!!
·
Betting Duties are to be
abolished from 1st January 2002, a 15% tax on bookmakers’ gross
profits will be introduced.
Please
contact us for further advice,
Our
partners are
Ian
J Fletcher FCA
A
David Simpson BA(Oxon) ACA