Budget update: Tax and NIC rates

[hrbs]

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Hi

A quick summary of the tax/NIC issues from the last 2 budgets.

Tax:
The Chancellor has decided to postpone the rise in the small companies rate by 12 months to 1 April 2010 so it remains at 21% until then after rising from 20% on 1 April 2008. This is good news for all those who are incorporated as those who haven't "gone limited" are facing further class 4 NIC increases and income tax rates of upto 40%, potentially rising even further in 2011/12.

NIC (self-employed):
The class 4 NIC upper threshold will increase from the 2007/08 level of £34,840 , to £40,040 for 2008/09 to £43,875 for 2009/10 - an increase of over £9k of profits that will be chargeable at 8%. The biggest increase applying to your 2008/09 profits.

The lower threshold increases from £5,225 to £5,435 to £5,715 for the same periods.
As you can see from these figures the amount of profits chargeable to 8% Class 4 NIC is increasing steadily. Class 4 will be payable at 1% over the upper threshold.

Low salary/high dividends:
If you are using this strategy to extract profits from your limited company, the annual threshold at which you will get NIC credits without paying any NIC in 2009/10 is £5720 (52 x £110). This is lower than the personal allowance of £6,475 so if you are paying upto the personal allowance you will be paying both personal and company NIC. The NIC threshold is not expected to be increased to the personal allowance level until 2011/12 ie after the next election.

The low salary/high dividend strategy is explained at Save Tax and National Insurance with your limited company : Business and accounting tips from HRBS Accountants which, in a nutshell, means you can plan when to take profits from your limited company to minimise your personal tax bill.

Income shifting:
This legislation has been postponed for a further year ... hopefully forever!

Regards

Keith
http://HRBS.biz

[Mogga]

If we have option to invoice now should we? It is better to take the 17.5% vat rather than the 15%?

[getvisible]

Brown and Darling don't have a ****ing clue!

They've based their calculations on estimations that they say are very likely to be inaccurate (in the document they published but not publicaly stated). Gov't borrowing is at its highest for 68 years!

They annoying the retail industry by messing around with VAT cuts when they actually say about half of any reductions will be used to reduce personal debt and not spent in the shops! So 1.25% for what? Then they think that all the shops will reduce prices by the full 2.5% I doubt any shop will conciously do that, they'll use the reduction to bolster (or create) profits.

Then there's no reduction for children's clothes, foods, utilities or petrol (as duty is going up more than the VAT reduction). These guys need to be locked up in a funny farm!

Saying we're giving you a slight tax cut now but 18 months down having to ramp up tax to pay for it isn't going to make people go out and spend as they'll know be have less money in the future!

They're basing everything of the Keynsian Multiplier effect (Keynesian economics - Wikipedia, the free encyclopedia) but they can't even get that right!

[drivetowin]

Lee

I don't disagree with you but I think they are stuck between a rock and a hard place.

They may not have got it right, but compared to the Tory alternative approach which appears to be "lets bury our head in the sand, pretend this isn't happening, and wait till it goes away" - and if millions lose their jobs and houses in the meantime then so be it - then I'd rather have a Government that at least tries to do something to stimulate the economy.

While everyone is focusing on the VAT, there were a number of measures yesterday in Goverment effectively guaranteeing £2bn of loans to SME's which should help free up business credit.

I think the move to allow companies of all sizes time to spread their tax payments (not just of VAT but PAYE, NI and Corporation Tax too) is very welcome - this will be a big aid to cashflow for many businesses.

[getvisible]

Lee
They may not have got it right, but compared to the Tory alternative approach which appears to be "lets bury our head in the sand, pretend this isn't happening, and wait till it goes away" - and if millions lose their jobs and houses in the meantime then so be it - then I'd rather have a Government that at least tries to do something to stimulate the economy.

could you let me know where you got that from so I can have a read/listen/watch of it myself?

[drivetowin]

I didn't get it from anywhere - it's just my opinion based on what I have heard Osborne/Cameron say in the last week or so.

Even yesterday in the Commons, Osborne focused on what Darling said was going to be borrowed but did not actually utter one word to say what he would do differently (except presumably not borrow the money, so with falling tax revenues he would then also presumably dramatically cut public spending) - so how would that give the economy a boost?

[getvisible]

I didn't get it from anywhere - it's just my opinion based on what I have heard Osborne/Cameron say in the last week or so.

Even yesterday in the Commons, Osborne focused on what Darling said was going to be borrowed but did not actually utter one word to say what he would do differently (except presumably not borrow the money, so with falling tax revenues he would then also presumably dramatically cut public spending) - so how would that give the economy a boost?

my view is that tax should be raised to pay for public services or to promote social change. It should never be used in a keynsian sense - its just rubbish.

The thing is that you're only seeing what the media want you to see. The story of the day is that the Conservatives don't offer an alternative, so that's all you're going to see.

[DavidCartlidge]

They may not have got it right, but compared to the Tory alternative approach which appears to be "lets bury our head in the sand, pretend this isn't happening, and wait till it goes away" - and if millions lose their jobs and houses in the meantime then so be it - then I'd rather have a Government that at least tries to do something to stimulate the economy.

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