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Pre-Budget Report 2008

The good news for Small Business owners this year was that the Budget contained no nasty new surprises.

Most of the difficult announcements had already been leaked or made previously, such as the Entrepreneurs relief and the 18% Capital Gains Tax rate. There were some interesting postponements, which may be more politically motivated that economically, and a further move towards what appears to be an inevitable alignment of small company and mainstream corporation tax rates.

We heard once again how simplification of the tax system is being looked at, but no great specific details were given and this remains one of the biggest challenges of the current system as the speed of new rules and anti-avoidance measures continue to outpace simplification attempts.

Good news included the postponement of income shifting legislation for a year, whereas bad news included the less obvious raising of the upper threshold of class 4 NIC for self the employed to over £40,000 (effectively a potential extra £364 a year), and the increase in Corporation Tax for small businesses to 21% from 20% from 1st April 2008.

Other plans announced which should benefit small businesses include improving access to finance by expanding the Small Firms Loan Guarantee Scheme. £60m extra has been made available and the current age limit of those applying for this funding has been relaxed. From April 2008, all companies with growth ambitions over five years old will have access to this funding.

Hidden extra costs, however, include announcements to commence road pricing trials and an increase in fuel duty, postponed until October 2008. Small businesses reliant on their vehicles now have time to plan this extra cost.

Abacus Accountants have spent time worrying about changes in the Budget so that you don't have to. For a stress free service for all your accountancy and tax saving needs then make sure you contact Abacus Accountants today on 08700 501 483 or complete our online form and we will put you in touch with one of our local offices. Each office is centrally updated with changes in legislation in order to deliver the best service possible to all of our clients.

If you would like to see the full rate changes and allowances then please click here.

Key tax rates and allowances

Value Added Tax (VAT)

Current rate

On and after 1 Dec 2008

On and after 1 Jan 2010

Standard rate

15.0%

15%

17.5%

Income tax

£ per year (unless stated)

2008/09

Change

2009/10

Income tax personal and age-related allowances

Personal allowance (age under 65)

£6,035

+£440

£6,475

Personal allowance (age 65-74)

£9,030

+£460

£9,490

Personal allowance (age 75 and over)

£9,180

+£460

£9,640

Married couple's allowance* (age less than 75 and born before 6 April 1935)

£6,535

+£330

£6,865

Married couple's allowance* (age 75 and over)

£6,625

+£340

£6,965

Married couple's allowance* - minimum amount

£2,540

+£130

£2,670

Income limit for age-related allowances

£21,800

+£1,100

£22,900

Blind person's allowance

£1,800

+£90

£1,890

* given at the rate of 10%

Pension schemes allowances

Annual allowance

£235,000

+£10,000

£245,000

Lifetime allowance

£1,650,000

+£100,000

£1,750,000

Income tax: taxable bands

2008-09

£ per year

2009-10

£ per year

Starting savings rate 10%*

£0 - £2,320

Starting savings rate 10%

£0-£2,440

Basic rate 20%

£0 - £34,800

Basic rate 20%*

£0 - £37,400

Higher rate 40%

Over £34,800

Higher rate 40%

Over £37,400

* There is a 10p starting rate for savings only. If an individual's non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income.

National insurance contributions

£ per week (unless stated)

2008-09

Change

2009-10

Lower earnings limit, primary Class 1 per week

£90

+£5

£95

Upper earnings limit, primary Class 1 per week

£770

+£74

£844

Upper Accruals Point

N/A

N/A

£770

Primary threshold

£105

+£5

£110

Secondary threshold

£105

+£5

£110

Employees' primary Class 1 rate between primary threshold and upper earnings limit

11%

-

11%

Employees' primary Class 1 rate above upper earnings limit

1%

-

1%

Employees' contracted-out rebate, salary-related schemes

1.6%

-

1.6%

Employers' contracted-out rebate, money-purchase schemes

1.6

-

1.6%

Married women's reduced rate between primary threshold and upper earnings limit

4.85%

-

4.85%

Married women's rate above upper earnings limit

1%

-

1%

Employers' secondary Class 1 rate above secondary threshold

12.8%

-

12.8%

Employers' contracted-out rebate, salary-related schemes

3.7%

-

3.7%

Employers' contracted-out rebate, money-purchase schemes

1.4%

-

1.4%

Class 2 rate

£2.30

+£0.10

£2.40

Class 2 small earnings exception (per year)

£4,825

+£250

£5,075

Special Class 2 rate for share fisherman

£2.95

+0.10

£3.05

Special Class 2 rate for volunteer development workers

£4.50

+£0.25

£4.75

Class 3 rate (per week)

£8.10

+£3.95

£12.05

Class 4 lower profits limit (per year)

£5,435

+£280

£5,715

Class 4 upper profits (per year)

£40,040

+£3,835

£43,875

Class 4 rate between lower profits limit and upper profits limit

8%

-

8%

Class 4 rate above upper profits limit

1%

-

1%

Income tax

£ per year (unless stated)

2008/09

Change

2009/10

Income tax personal and age-related allowances

Personal allowance (age under 65)

£6,035

+£440

£6,475

Personal allowance (age 65-74)

£9,030

+£460

£9,490

Personal allowance (age 75 and over)

£9,180

+£460

£9,640

Married couple's allowance* (age less than 75 and born before 6 April 1935)

£6,535

+£330

£6,865

Married couple's allowance* (age 75 and over)

£6,625

+£340

£6,965

Married couple's allowance* - minimum amount

£2,540

+£130

£2,670

Income limit for age-related allowances

£21,800

+£1,100

£22,900

Blind person's allowance

£1,800

+£90

£1,890

* given at the rate of 10%

Pension schemes allowances

Annual allowance

£235,000

+£10,000

£245,000

Lifetime allowance

£1,650,000

+£100,000

£1,750,000

Income tax: taxable bands

2008-09

£ per year

2009-10

£ per year

Starting savings rate 10%*

£0 - £2,320

Starting savings rate 10%

£0-£2,440

Basic rate 20%

£0 - £34,800

Basic rate 20%*

£0 - £37,400

Higher rate 40%

Over £34,800

Higher rate 40%

Over £37,400

· There is a 10p starting rate for savings only. If an individual's non savings taxable income exceeds

· the starting rate limit, the 10p starting rate for savings will not be available for savings income.

National insurance contributions

£ per week (unless stated)

2008-09

Change

2009-10

Lower earnings limit, primary Class 1 per week

£90

+£5

£95

Upper earnings limit, primary Class 1 per week

£770

+£74

£844

Upper Accruals Point

N/A

N/A

£770

Primary threshold

£105

+£5

£110

Secondary threshold

£105

+£5

£110

Employees' primary Class 1 rate between primary threshold and upper earnings limit

11%

-

11%

Employees' primary Class 1 rate above upper earnings limit

1%

-

1%

Employees' contracted-out rebate, salary-related schemes

1.6%

-

1.6%

Employers' contracted-out rebate, money-purchase schemes

1.6

-

1.6%

Married women's reduced rate between primary threshold and upper earnings limit

4.85%

-

4.85%

Married women's rate above upper earnings limit

1%

-

1%

Employers' secondary Class 1 rate above secondary threshold

12.8%

-

12.8%

Employers' contracted-out rebate, salary-related schemes

3.7%

-

3.7%

Employers' contracted-out rebate, money-purchase schemes

1.4%

-

1.4%

Class 2 rate

£2.30

+£0.10

£2.40

Class 2 small earnings exception (per year)

£4,825

+£250

£5,075

Special Class 2 rate for share fisherman

£2.95

+0.10

£3.05

Special Class 2 rate for volunteer development workers

£4.50

+£0.25

£4.75

Class 3 rate (per week)

£8.10

+£3.95

£12.05

Class 4 lower profits limit (per year)

£5,435

+£280

£5,715

Class 4 upper profits (per year)

£40,040

+£3,835

£43,875

Class 4 rate between lower profits limit and upper profits limit

8%

-

8%

Class 4 rate above upper profits limit

1%

-

1%