Financial Monitor (November 2007)
Income Tax and Personal Allowances
HM Revenue and Customs have announced the level of personal allowances which will apply in the tax year 2008/09. The personal allowance for those aged under 65 will be increased by £210 to £5,435. The allowance for those aged 65 to 74 will rise by £1,480 to £9,030 and for those aged 75 and over will rise by £1,490 to £9,180. The higher personal allowances for those aged over 65 will be reduced where income exceeds £21,800 (currently £20,900).
The married couples’ allowance which is only available to those born before 6 April 1935 will increase to £6,535 (currently £6,285) and to £6,625 (currently £6,365) where either spouse is aged 75 and over. The married couples’ allowance will continue to attract relief at 10%.
The tax bands for 2008/09 have not yet been finalised.
National insurance contributions
There are no changes proposed to national insurance rates for 2008/09. However, the weekly amount of earnings below which no NIC is payable by employers and employees is increased by £5 to £105 and the upper limit for 11% employees’ national insurance is increased from £670 to £770 per week. Class 2 contributions paid by the self employed will increase by 10p per week to £2.30 per week. The self employed will also pay 8% Class 4 contributions on earnings between £5,435 and £40,040 per annum (currently £5,225 and £34,840) and 1% on earnings above £40,040.
Mileage rates for business use of privately owned cars
Most businesses will be aware that they can pay their employees tax free mileage allowances for using their own cars for business purposes. The rate being up to 40p per mile for the first 10,000 business miles in the tax year and 25p per mile thereafter. Employees should also be aware that if their employer pays lower rates then they can claim a tax deduction for the difference. For example if an employee undertakes 12,000 business miles per year and receives 25p per mile for all miles, he can claim the following 10,000 miles at 15p (40p – 25p) which totals £1,500, giving a basic rate taxpayer a refund of £330.
In addition, when an employee takes a colleague on a business trip they can receive an extra 5p per passenger mile. This effectively extends the rates above to 45p and 30p where one passenger is carried or 50p and 35p where two passengers are carried.
Employees using their cars for business purposes need to ensure they are properly insured to do so.
The current system of mileage allowances is likely to be changed in the future where different rates will be available dependant on the emission levels of cars which will favour those with lower emissions.
Recruiting foreign nationals
The continued expansion of the EU means that applications from foreign nationals for positions with UK businesses are becoming increasingly common. While diversifying the workforce can provide benefits, employers also need to be aware of their legal obligations.
Every employer must carry out checks to ensure that potential employees are legally entitled to work in the UK. If an employer fails to do so and employs someone illegally, it could be prosecuted and find itself landed with a fine of up to £5,000, not to mention the management time which will be taken up dealing with such an issue.
In addition, while the stigma of prosecution is at the forefront of employers’ minds, it is also important to note that where someone has been employed illegally, his or her contract will be void. This may be of particular relevance if the individual in question has had access to confidential information, because any non compete clauses, restrictive covenants and contractual confidentiality provisions will be unenforceable.
Does your website comply with the Companies Act?
Companies House have been writing to companies who are not complying with the legislation. The company website must show the company name, number and registered office address. Failure to do so is a breach of the Companies Act.
Older women can claim pensions
More than half a million women aged 60 to 69 get no state pension because they did not pay enough national insurance contributions during their working lives to qualify. By topping up their contributions now, at the rate of around £400 for each missed year, they can qualify for a minimum annual pension of £1,134. Some are entitled to five years’ worth of back dated payments.
For more information, contact the Pension Service on 0845 606 0265 or the Pensions Advisory Service on 0845 601 2923.
Tax deductible Christmas gifts
As we approach the Festive Season we thought we would summarise the tax treatment of any gifts made to customers and suppliers:
- Giving away free samples of your products is 100% deductible, although not necessarily a gift that would be appreciated!
- Gifts carrying a company advertisement for the business are tax deductible but only up to £50 per person, per annum. Gifts of food, drink, tobacco and vouchers (eg. M & S vouchers) are not tax deductible even if the cost is less than £50 or if they carry a conspicuous advertisement.
- The VAT rules are different and VAT can be claimed on all gifts including food, drink and tobacco providing the total value excluding VAT is less than £50 per person. If the gift exceeds this amount no VAT can be reclaimed.
In theory gifts to employees are taxed as a benefit in kind but the Revenue have by concession exempted small items such as turkeys, bottles of wine, chocolates etc given at Christmas time but cash is subject to PAYE whatever the amount given.
Increase in State Pension age
If you were born after 5 April 1959 your state pension age has now been increased. The Pension Act 2007 which became law on 26 July 2007 contains provisions that raise the state pension age to 68 by 6 April 2046. The first increase to age 66 is being phased in between April 2024 and April 2026. This increase in pension age reflects the need to offset the additional costs which will arise from:
- likely increase in the basic state pension being based on average earnings rather than pensions from 2012 (at the earliest) and
- reducing the qualifying period for full basic pension entitlement to 30 years so that more people qualify for a full pension.
Inheritance Tax Planning
The use of Trusts has been popular for IHT planning but has been restricted by the changes in the Finance Act 2006 and often does not suit the requirements of the client. An alternative, where funds are available, is to make an investment in shares on the Alternative Investment Market (AIM) which are currently exempt from inheritance tax after two years of ownership. A number of Investment Managers have a portfolio of AIM shares for the purpose of IHT mitigation which limit the risk of investment in this area. For further information please contact Peter Newsam.
Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken.
UHY Wingfield Slater
Wellington House, 39 Wellington Street, Sheffield S1 1XB
Tel: 0114 275 1544 Facsimile: 0114 275 1366 Email: info@uhy-wingfieldslater.com Web Site: www.uhy-wingfieldslater.com
Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms.
 top
|
