Tax Rates 2008/09

These do not yet take into account the changes proposed recently by the Chancellor until they have been confirmed in the Finance Act. He proposed to increase the personal allowance by £600 and reduce the starting point for higher rate tax by £1,200.

Income Tax Rates	Tax Year	Tax Year
	2008/09	2007/08
Starting rate band to	£2,320	£2,230
Tax rate	10%*	10%
Basic rate band - next	£2,321 - £36,000	£32,370
Non-savings rate	20%**	22%
Savings rate	-	20%
Dividend ordinary rate	-	10%
Higher rate - income over	£36,000	£34,600
Tax rate excluding dividends	40%	40%
Dividend upper rate	32.5%	32.5%

 * Only applicable to dividends and savings income.

** Except dividends (10%) and, in 2007/08, savings income (20%)

Personal Allowances
Allowances that reduce taxable income	£	£
Personal allowance        under 65	5,435	5,225
65-74*	9,030	7,550
75 and over*	9,180	7,690
Allowances that reduce tax
Married couple's allowance (MCA)
Age of elder partner  73-74*	653.50	628.50
75 and over*	662.50	636.50
minimum	254.00	244.00

* higher allowances for those aged 65 or more are scaled back when income exceeds £21,800 (2007/08, £20,900).  MCA is only available where at least one partner was born before 6 April 1935.

Capital Gains Tax Allowances
Individuals	£	£
Annual exemption	9,600	9,200
Trusts
Annual exemption	4,800	4,600

Corporation Tax					Year to 31.03.09	Year to 31.03.08
				Profits Band £	Rate %	Rate %
Small companies rate				0 - 300,000	21	20
Marginal (small companies rate)				300,001 - 500,000	29.75	32.50
Full rate				>1,500,000	28	30

Car, Van & Fuel Benefits
CO2 emissions (gm/km) (round down to nearest 5gm/km)	% of car's list price taxed	Fuel Benefit (16,900 x %) £
up to 135	15	2,535
140	16	2,704
145	17	2,873
150	18	3,042
155	19	3,211
160	20	3,380
165	21	3,549
170	22	3,718
175	23	3,887
180	24	4,056
185	25	4,225
190	26	4,394
195	27	4,563
200	28	4,732
205	29	4,901
210	30	5,070
215	31	5,239
220	32	5,408
225	33	5,577
230	34	5,746
235 and above	35	5,915

Company Cars

• For diesel cars add a 3% supplement but maximum still 35%. This was waived for Euro IV diesels. From 2006/07, no waiver for diesels registered on/after 1 January 2007.
• Discounts apply to certain environmentally friendly cars.
• For cars registered before 1 January 1998 the charge is based on engine size.
• The list price includes accessories and is subject to an upper limit of £80,000.
• The list price is reduced for capital contributions made by the employee up to £5,000.
• From 2008/09 a new 10% rate applies to non-electric cars with emissions of no more than 120gm/km. Environmentally friendly discounts do not apply to these cars but the diesel supplement does. 

Fuel Benefit

• The fuel benefit charge is proportionally reduced if provision of private fuel ceases part way through the year.
• The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Van benefit per vehicle

2007/08 and 2008/09

Van benefit £3,000

Fuel benefit £500

Mileage Allowance Payments For Private Vehicles
	2007/08 onwards
Cars and Vans	Rate per mile
Upto 10,000 miles	40p
Over 10,000 miles	25p
Bicycles	20p
Motorcycles	24p

These rates represent the maximum tax free mileage allowances for employees using their own vehicles for business. Any excess is taxable. If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

Authorised Mileage Rates For Company Cars - effective from 1 July 2008
Engine Size			Petrol	Diesel	LPG
1400cc or less			12p	13p	7p
1401cc to 2000cc			15p	13p	9p
Over 2000cc			21p	17p	13p

These rates are the Inland Revenue's advisory fuel only mileage rates for company vehicle drivers.You should now be using these rates for paying fuel only mileage allowances and for calculating the VAT on fuel.

National Insurance
Class 1 (employed) contracted in	2008/09 Rates
Weekly earnings	Employer	Employee
Up to £105	Nil	Nil
£105.01 - £770	12.8%	11%
Over £770	12.8%	£73.15 + 1%
Class 1A (employers)	12.8% on employee taxable benefits
Class 1B (employers)	12.8% on PAYE settlement agreements
Class 2 (self-employed)	£2.30 per week, small earnings exception p.a £4,825
Class 3 (voluntary)	£8.10 per week
Class 4 (self employed)	8% on profits between £5,435 and £40,040 plus 1% on profits over £40,040

Inheritance Tax
		Chargeable Transfers
Death Rate %	Lifetime Rate %	2008/09 - £'000	2007/08 - £'000
Nil	Nil	0 - 312	0 - 300
40	20	Over 312	Over 300
Inheritance Tax Reliefs
Annual Exemption	£3,000
Small Gifts	£250
Marriage	- Parent	£5,000
	- Grandparent	£2,500
	- Bride/groom	£2,500
	- Other	£1,000

Value Added Tax

A person who makes taxable supplies is liable to be registered for VAT.

The standard rate of VAT is 17.5% and the reduced rate is 5%.

Annual registration limit from 1 April 2008 £67,000
Annual deregistration limit from 1 April 2008 £65,000

New VAT fuel scale charges from May 2007

Capital Allowances

Plant and Machinery - Annual Investment Allowance (AIA)

The AIA gives a 100% write-off on most types of plant and machinery costs, including integral features and longlife assets but not cars, of up to £50,000 p.a. Any costs over the AIA fall into normal capital allowance pools at either 10% or 20%.

The AIA applies to expenditure incurred on or after 6 April 2008 (1 April 2008 for companies) by all businesses. Special rules apply to accounting periods straddling these dates. The £50,000 limit may need to be shared between certain businesses under common ownership.

Other Plant and Machinery Allowances

The annual rate of allowance is 20% (25%) from 6 April 2008 (1April 2008 for companies). The 20% rate also applies to cars, with an overriding maximum of £3,000 per car. Special rules apply for accounting periods straddling these dates. First year allowances are abolished except a 100% may still be available on certain energy efficient plant and cars.

A new 10% rate applies to expenditure incurred on integral features and on long life assets on or after 6 April 2008 (1 April 2008 for companies). Long life asset expenditure brought forward will obtain the 10% rate (6%), with special rules applying for accounting periods straddling these dates.

Industrial and Agricultural Buildings and Hotels

The annual rate allowance is 3% (4%) from 6 April 2008 (1 April 2008 for companies). Special rules apply for accounting periods straddlings these dates.

Self Assessment: Key Dates 2008/09

31 July 2008 - Second payment on account for 2007/08.

5 October 2008 - Deadline for notifying H M Revenue & Customs of new sources of income if no tax return has been issued for 2007/08.

31 October 2008 - Deadline for submission of 2007/08 non-electronic returns. Also, the deadline for submission of 2007/08 returns requiring H M Revenue & Customs calculation and where the taxpayer wants a balancing payment (below £2,000) collected through their 2009/10 PAYE code.

31 January 2009 - Deadline for filing electronic tax returns for 2007/08. Balancing payment due for 2007/08. First payment on account due for 2008/09.