Pre-budget report

[SBar]

Link containing PDF of the full report

http://news.bbc.co.uk/1/hi/uk_politics/4500054.stm

A few interesting bits.

Limited companies band of 0%->19% will be abolished and it will be set to 19% all the way up. I'm not sure when this comes in but it could hurt a few people a bit.

First year capital allowances will stay at 50 per cent

The limits on some of the simpler to manage VAT accounting schemes will be increased

R&D tax credits look like they've been given the green light to carry on.

I'm sure there are a few more that will apply to others more.

[openmind]

Originally posted by SBar
Limited companies band of 0%->19% will be abolished and it will be set to 19% all the way up. I'm not sure when this comes in but it could hurt a few people a bit.

Oh joy. The word ******** springs to mind

[ECI]

I will be giving the tax man more than I give you phil!

eek

[James Smith]

The corp tax change is actually "good news" in my book as it removes a ridiculously complicated bit of legislation that few people outside my profession actually understood (and some of us struggled a bit!) and brings us back to the point we where at in 1999/0 when he started all this lower rate malarkey which I honestly believe was just supposed to be a gimmick – he didn’t realise it would actually change behaviour.

I am fully in favour of this simplification. Gordon put in the 0% band a few years ago, and then had to put a really bad bit of anti-avoidance legislation (Non Corporate Distribution rate) in to cope with what was perceived as abuse by us naughty accountants – as if we aren’t going to play with all the nice toys he gives us to save our clients tax.

I believe the change will occur for periods after 1st April 2006, so there will be a nasty split year for most companies, but your friendly accountant will do the hard math for you, so need to worry. We wont see how they will draw the line exactly until the finance act in late March, but I would imagine your main planning tool is to not take any more dividends prior to 31st March than you need to.

NB, FYA capital allowances are only 40% for the current year 2005/6 for no apparent reason, although 50% in 2004/5 and now presumably 50% in 2006/7. Nothing like a nice bit of consistency - I think he just hates accountants and likes to make it hard for us.

Regards,

[natasha]

It just shows you that when predicting any type of figures, it can go wrong... no matter who you are!

[SBar]

Thanks for the explanations James. As a non-accountant I think the abolishment of the 0->19% band makes sense, it's easier to work out figures for everyone

[openmind]

OK so in English please, am I as a Limited Company likely to pay more or less tax?

From first glance, it looks like I'll pay more?

[James Smith]

Marginally more Phil it depends how much money you make this year. You probably wont even notice the difference. There is a horrible sliding scale that works between £10k and £50k profit that is further weakened by the amount of dividends you take. The only people to be hit hard are those earning around £10k PA and who haven’t taken any dividends. This tends to just be in the first year, often with people who probably shouldn’t have had a ltd co. in the first place!

If you earn over £50k or take out all your profits in dividends it will have no actual effect as the existing legislation takes back the nil rate band.

Belive me its good news - corp tax is now 19% right upto £300k. Thats a lot easier for everyone.