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Capital gains tax The capital gains tax (CGT) annual exempt amount is increased in line with statutory indexation to £9,600 for the tax year 2008-09 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees is increased to £4,800. Every husband, wife, civil partner and child has his or her own £9,600 annual exempt amount. For gains above the annual exempt amount the CGT rate for 2008-09 will be 18 per cent. In addition, a new entrepreneurs' relief will reduce the effective tax rate on some gains to 10 per cent. Inheritance tax As announced in Budgets 2006 and 2007, the inheritance tax allowance will be increased in each of the next three years. The allowance for the tax year 2008-09 is £312,000 for individuals or £624,000 for married couples and civil partners; for 2009-10 it will be £325,000 for individuals or £650,000 for married couples and civil partners; and for 2010-11 it will be £350,000 for individuals or £700,000 for married couples and civil partners. The value of estates over and above the allowance is taxed at 40 per cent. The proportion of estates forecast to pay inheritance tax in 2008-09 is 5%. Corporation tax As announced in the major package of reforms to the business tax system at Budget 2007, the main rate in Corporation Tax will be reduced from 30% to 28% from this April. This package also announced that in 2008-09 the Small Companies rate will increase from 20 per cent to 21 per cent. Capital Allowances From 1 April 2008 for corporation tax and 6 April 2008 for income tax, changes will apply to the rates of capital allowances. Allowances for plant and machinery will reduce to 20%, allowances for long-life assets will increase to 10% and a new classification of features integral to a building will be introduced at a rate of 10%. The amount of relief claimable under industrial and agricultural buildings allowances will be reduced by one quarter, as part of phasing them out in full by 2011. First-year allowances for small and medium-sized enterprises will be replaced by a new Annual Investment Allowance of £50,000 for most businesses regardless of size, giving relief on 100% of the first £50,000 of expenditure. Loss making companies investing in plant and machinery which qualifies for Enhanced capital allowances for environmentally beneficial and energy saving technologies will be able to surrender losses from qualifying expenditure for a cash payment of 19% of the expenditure, subject to a cap of the higher of £250,000 or a company’s PAYE/National Insurance Contributions liabilities. From April 2008, the rate of research and development tax credits will rise from 125% to 130% for large companies and from 150% to 175% for SMEs (the SME increase is subject to approval from the European Commission and will be made effective by Treasury Order from a date not earlier than 1 April 2008). Stamp taxes and duty The rates and thresholds for stamp duty land tax (SDLT) remain unchanged. For residential land and property, the rates are 0 per cent for transactions of £125,000 or less, 1 per cent for over £125,000 to £250,000, 3 per cent for over £250,000 to £500,000 and 4 per cent for over £500,000. The 0 per cent band for residential transfers in designated disadvantaged areas extends to £150,000. For non-residential land and property, the rates are 0 per cent for transactions of £150,000 or less, 1 per cent for over £150,000 to £250,000, and thereafter the same as for residential land and property. For new leases, the rates applicable in respect of the premium are the same as for transfers of land and buildings (except that special rules apply where the rent exceeds £1,000 annually for non-residential land and property. The £600 threshold has been abolished for residential land and property with effect from 12 March 2008). For the rental element of new leases, the charge is based on the net present value (NPV), which is the total of the discounted annual rental payments. The NPV is charged at 1 per cent on the excess over £125,000 for residential land and property and 1 per cent on the excess over £150,000 for non-residential land and property. |
Legislative Developments
