| Rates
and Allowances for 2005 and 2006
This
Budget did nothing to alter our belief that Inheritance Tax
and Pensions will be the hot topics for the coming year. Inheritance
Tax because we are all getting older, Pensions because we
are all getting older and because it all changes from 6 April
2006.
So
no major Budget changes to any of the taxes. But he did tinker
with:
- Stamp
Duty (starting threshold raised to £120,000)
- Inheritance
Tax Nil Rate Band (up to £270,000)
- ISA's
(extended to 2010)
- Child
Tax Credit (increased)
- Anti-avoidance
measures (various)
- Rates
and Allowances (set out beyond)
More
important are the changes on 5 April 2005 announced previously:
- Pre
Owned Asset Tax (POAT) starts (affecting Inheritance Tax
planning) announced in 2003
- Child
Trust Funds (£250 to children born September 2002)
announced in 2003
- Pension
'Simplification' (Phase 1 - technical rule changes)
announced in 2002
And it
is this Pensions 'Simplification' topic that will dwarf all
others (even Inheritance Tax) in the coming year. The Government
is trying to rationalise the many different pension regimes
under one umbrella (hence 'Simplification'). Phase 2 with
the really dramatic changes takes place on 6 April 2006. There
are issues here for people with Personal Pensions, company
schemes (final salary or not) and of course for those with
no pension.
Don't
believe your Sunday Supplements that we will all be putting
our Verbier ski chalets, Spanish Villas and houses for the
children into our pensions. That will suit some but there
is more to it!
The rules
will be much softer on the underlying investments and we will
see a growth in SIPPs (Self Invested Personal Pensions) to
facilitate this. The rules will also be much softer on how
much we can put in each year (100% of earnings), but much
harder on the maximum allowable in the pot (£1,500,000).
There
are decisions to be taken before 5 April 2006 especially for
people with funds close to the maximum and there will be at
least 4 ways of taking a pension in retirement.
We will
be trying to contact everyone affected over the coming months
to explain the impact on the planning, but don't wait for
us, if you want an earlier view please call.
And please
call if you want any Inheritance Tax comment or Budget 2005
clarification. Remember Pensions and Inheritance Tax are strongly
linked - the higher your pension income, the more of your
other assets you can put beyond the Chancellor's grasp!
Rates and Allowances
for 2005 and 2006
Rates and allowances
for income tax, corporation tax, capital gains tax, inheritance
tax and the pension schemes earnings cap are set out below.
|
|
2004-05 (£)
|
2005-06 (£)
|
Increase (£)
|
| Income
tax allowances |
|
|
|
| Personal
allowance
Personal allowance for people aged 65-74
Personal allowance for people aged 75 and over |
4,745
6,830
6,950 |
4,895
7,090
7,720 |
150
260
270 |
| Income
limit for age-related allowances |
18,900
|
19,500 |
600 |
| Married
couple’s allowance for people born before 6 April
1935
Married couple’s allowance –aged 75 or more
Minimum amount of married couple’s allowance
Blind person's allowance |
5,725
5,795
2,210
1,560 |
5,905
5,975
2,280
1,610 |
180
180
70
50 |
| Capital gains tax annual
exempt amount:
Individuals etc
Other
trustees |
8,200
4,100 |
8,500
4,250 |
300
150 |
| Inheritance
tax threshold |
263,000 |
275,000 |
12,000 |
| Pension
schemes earnings cap |
102,000 |
105,600 |
3,600 |
| Taxable bands 2004-05 (£)
|
Taxable bands 2005-06 (£)
|
| Starting
rate 10% |
0
– 2,020 |
Starting
rate 10% |
0
– 2,090 |
| Basic
rate 22% |
2,020
– 31,400 |
Basic
rate 22% |
2,090
– 32,400 |
| Higher
rate 40% |
Over
31,400 |
Higher
rate 40% |
Over
32,400 |
| Corporation tax profits
2005-06 (£) |
|
| Starting
rate Zero % |
0
– 10,000 |
| Marginal
relief |
10,001 – 50,000 |
| Small
companies’ rate 19% |
50,001 – 300,000
|
| Marginal
relief |
300,001 – 1,500,000 |
| Main
rate 30% |
1,500,001or more |
The
main rate of corporation tax for 2005-06 will be 30 per cent.
National Insurance changes from 6
April 2005
|
|
2004/2005 |
2005/2006 |
| Class
1 Employees |
| On
first |
£91
pw |
Nil
|
£94
pw |
Nil
|
| Between
|
£91
- £610 pw |
11%
|
£94
- £630 pw |
11%
|
| Over
|
£610
pw |
1% |
£630
pw |
1% |
| Employee's
contracted-out rate |
1.6% |
|
1.6% |
Married
womans
reduced rate |
4.85%
of £91.01 to £610 pw, 1% above £610 |
4.85%
of £94.01 to £630 pw, 1% above £630 |
| Class
1 Employers |
| On
first |
£91
pw |
Nil
|
£94
pw |
Nil
|
| Over |
£91
pw |
12.8%
|
£94
pw |
12.8%
|
| Employers'
contracted-out rebate, salary related schemes |
3.5% |
|
3.5% |
| Employers'
contracted-out rebate, money purchase schemes |
1% |
|
1% |
| Class
2 Self employed |
| Flat
rate |
£2.05
pw |
|
£2.10
pw |
| Small
earnings exception |
4,215
pa |
|
4,345
pa |
| Special
Class 2 rate for share fisherman |
£2.70
pw |
|
£2.75
pw |
| Special
Class 2 rate for volunteer development workers |
£3.95
pw |
|
£4.10
pw |
| Class
3 Voluntary |
| Flat
rate |
|
£7.15
pw |
|
£7.35
pw |
| Class
4 Self employed |
| On
profits between |
£4,745
- £31,720 pa |
8%
|
£4,895
- £32,760 pa |
8%
|
| |
above £31,720
|
1% |
above £32,760
|
1% |
Stamp
Taxes
Transfers
of property (consideration paid)
| Rate |
All
land in the UK |
Land
in disadvantaged areas |
| |
Residential |
Non-residential |
Residential |
Non-residential |
| Zero |
£0-60,000 |
£0-150,000 |
£0-150,000 |
All |
| 1% |
Over
£60,000 – 250,000 |
Over
£150,000 – 250,000 |
Over
£150,000 – 250,000 |
N/A |
| 3% |
Over
£250,000 – 500,000 |
Over
£250,000 – 500,000 |
Over
£250,000 – 500,000 |
N/A |
| 4% |
Over
£500,000 |
Over
£500,000 |
Over
£500,000 |
N/A |
New
leases (lease duty)
Duty
on the premium is the same as for transfers of land (except
that special rules apply for premium where rent exceeds £600
annually). Duty on the rent is charged on the Net Present
Value (NPV). The rates indicated apply to the amount of NPV
in the slice, not to the whole value.
| Rate |
Net
Present Value of Rent Rate |
| |
Residential |
Non-residential |
| |
Slice
of NPV |
| Zero |
£0
- £120,000 |
£0
- £150,000 |
| 1% |
Over
£120,000 |
Over
£150,000 |
The rate
of stamp duty / stamp duty reserve tax on the transfer of
shares and securities is unchanged at 0.5% for 2005-06.
|
