Taxing Times Ahead – beware the 6th April 2008!
On the 6th April 2008 the tax system in the UK is undergoing a number of radical changes....
On the 6th April 2008 the tax system in the UK is undergoing a number of radical changes. Businesses and individuals have been given prior warning, but is the message getting through?
Simon Clarke, Finance and Technical Director of TaxAssist Accountants has the following advice to offer: “If you are in business, have complex personal tax affairs, or have a low income, you will be affected by a number of changes next year. In particular:
Income Tax Rates – Although the basic rate of income tax is dropping from the present 22% to 20%, the existing starting rate of 10% is to be abolished. Individuals on low incomes will pay more tax as a result.
Pension Contributions – An unwelcome effect of the lower basic rate tax rate is a lowering of total contributions to your pension scheme. At present if you pay £78 into your scheme the Government will top up the contribution with the basic rate tax deducted, £22. Total contributions invested £100. After the 5 April next year you will need to increase your contributions to £80 per month, tax top up £20, to achieve your £100 total investment.
Capital Gains Tax – The present indexation and taper relief are to be scrapped and replaced with a single tax rate of 18%. If you have owned business assets (shares in your own company for example), for a number of years, you will likely suffer a higher tax charge if you dispose of those assets after 5 April 2008. There will be winners and losers.
Family Businesses – If you have a family owned company or partnership the Revenue are introducing legislation to stop the arbitrary sharing of profits and dividends just to save tax. After the 5th April 2008 you may be asked to justify the underlying commercial reasons for the way in which income is allocated to family members, particularly husbands and wives. The impact of these tax changes will affect many small businesses after the 5th April 2008. However there is still a ‘window of opportunity’ between now and the end of March 2008; a period of time for implementing tax planning that will help to counter the changes to come.”
Simon continues: “The changes to Capital Gains Tax and the ‘shifting of income’ between family members will have far reaching consequences for owners of small businesses. There is no point in waiting until it is too late to take action. For instance anyone who owns assets that would be subject to capital gains tax if sold now, should seek professional advice at the latest February 2008 – there may still be strategies that can be implemented that overall will save you tax.”
For further information please call 0845 0096543 to be put in contact with your local TaxAssist Accountant or If you are interested in becoming a TaxAssist Accountant please click the 'Request Information' button below.
