Gordon Brown presented what may be his last pre-budget report
to Parliament today. There are no dramatic surprises in the
proposed changes to taxes, although the Chancellor has raised
his tax take by £2bn. We have summarised below some of the announcements
that directly affect the tax and other duties we pay.
As always if you need more information on any of the issues
raised by the Pre Budget Report please call.
Changes to Tax Allowances and rates
Income Tax Allowances
All income tax allowances are to be increased in line with
inflation. For 2007-2008 the new rates are:
Personal Allowance - under 65 years £5,225
Personal Allowance - age 65 to 74 years £7,550
Personal Allowance - age 75 and over £7,690
The income limit for age related allowances is now £20,900.
National Insurance
Minor increases in the lower earnings limit and no increase
to basic Class 1 contribution rates.
The self employed weekly contribution will rise by just 10p
to £2.20. Class 4 contributions based on self employed earnings
between £5,225 and £34,840 will continue to be charged at 8%.
Savings and Family Matters
Savings - Reform of the ISA regime
• making ISAs permanent with an overall annual investment
limit of £7,000.
• bringing Personal Equity Plans within the ISA rules
• allowing child trust funds to roll over into ISAs on
maturity
• allowing transfers from the cash to stocks and shares
component of ISAs.
Families with children
• From April 2007 the value of Child Tax Credit will increase
by £80 to £1,845 per year.
• From April 2009 every mother-to-be will become
eligible for Child Benefit from week 29 of their pregnancy.
The additional benefit will amount up to £200.
Environment and Climate Change
Road fuels - increase in excise duty
From 7 December 2006 the effective rate of excise duty for
road fuels will be increased by 1.25 pence per litre. (This
is in line with the inflationary increases published in the
Budget 2006). The same increase will be applied to bio-fuels.
Air Passenger Duty Rates will be increased from 1 February
2007
The new rates of duty will be:
• For the lowest class of travel: Passengers
flying to destinations in Europe will pay £10, to other destinations
£40.
• For other than the lowest class of travel: European travellers
will pay £20, to other destinations £80.
Extension to landlord's energy-saving allowance
Individual landlords and corporate landlords who let residential
properties and pay either income tax or corporation tax will
benefit from the new proposals. The changes are:
• availability will be extended to 2015
• qualifying expenditure will now include installation
of floor insulation
• the present maximum allowance of £1500 will be applied
to each property rather than to each building, and
• the allowance will be made available to corporate landlords
who let residential properties
These changes will take effect on or after 6 April 2007 but
may be subject to State Aid clearances.
Free insulation and central heating
The Chancellor has pledged to offer a further 300,000 households
free central heating and insulation.
Tax free energy sales
If you have installed micro generation technology in your home,
and receive payment from energy suppliers for the sale of surplus
of power, you will be pleased to know that legislation is to
be included in the Finance Bill 2007 to exempt this sale of
surplus power from income tax.
This exclusion will not apply to cases where surplus power is
sold in the course of a trade.
Zero Carbon Homes
The Pre Budget report has announced a time limited exemption
from stamp duty for most new zero carbon homes. Full details
will be issued in the 2007 Budget.
Other Issues
UK Real Estate Investment Trusts (UK-REITs)
Measures are to be introduced on or after 1 January 2007 that
will make it easier for newly established companies to become
UK-REITs.
Anti-avoidance measures
Certain avoidance schemes that have been notified to HMRC,
as now required by law, are to be closed as from 6 December
2006. They include arrangement to avoid corporation tax and
use of particular capital losses.
Stamp Duty Land Tax Anti-avoidance measures.
A number of schemes designed to avoid stamp duty land tax will
cease to be effective on or after 6 December 2006. There are
transitional provisions to help those who entered into contractual
commitments before 2 p.m. on 6 December 2006.
Construction Industry
In his Budget speech earlier this year the Chancellor delayed
the introduction of the new Construction Industry Tax Scheme
until April 2007. The Chancellor today confirmed that the new
scheme will operate as stated from April 2007.
DISCLAIMER - PLEASE NOTE: The ideas shared with you here
are intended to inform rather than advise. Taxpayers circumstances
do vary and if you feel that tax strategies we have outlined
may be beneficial it is important that you contact us before
implementation. If you do or do not take action as a result
of reading this newsletter, before receiving our written endorsement,
we will accept no responsibility for any financial loss incurred.
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