Budget Comment March 2003
National Insurance
Last year the Chancellor increased National Insurance for employees/self-employed by 1%, and for the employer by 1%. In addition for the employee/self-employed increase, there is no ceiling on earnings. Planning: this makes pension contributions more attractive and it improves the arguments in favour of trading through a Limited Company rather than self-employed.
Child Tax Credit
This was also announced last year and affects households with children and with gross income of less than £58,000. We have more detailed information if you feel it might be relevant to you or to someone you know. Planning: to receive the full benefit you must apply before 5 July 2003.
Anti-avoidance measures
The Chancellor announced 3 measures aimed at combating tax loss
- The decision in the Mansworth v Jelley (share option) case has been reversed.
- Domestic workers are to be treated as caught by the IR35 legislation.
- Share-based remuneration causing a loss of tax and NI is to be scrutinised. This is thought to mean the payment of dividends to spouses whose involvement in the business is minimal. The relevant anti-avoidance legislation is already in place but is rarely used. This quiet Press Notice signifies the Revenue’s intention to look at matters more closely in future. Planning: we need to ensure that Dividends are properly documented and paid on a timely basis. It has been our policy to ensure that this happens for some time now. Otherwise we can only await developments.
Employee Share Schemes
The government announced its intention to simplify the employee share schemes legislation and reduce the administrative and regulatory burden on employers. The measures will modernise both Company Share Options Plans, Save As You Earn schemes and Share Incentive Plans.
Charitable Donations
Finally, the Chancellor, having hit taxpayers with a substantial increase in NIC’s, thought it would be a good idea if taxpayers who are due repayments donate some or all of the repayment to charity. They have introduced a new facility to do so – it will be interesting to see the take up of the Chancellors offer!
Rates and Allowances for 2003 and 2004
Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax and the pension schemes earnings cap are set out below.
| 2002-03 (£) |
2003-04 (£) |
Increase (£) |
|
| Income tax allowances | |||
| Personal
allowance Personal allowance for people aged 65-74 Personal allowance for people aged 75 and over |
4,615 |
4,615 |
0 |
| Income limit for age-related allowances | 17,900 |
18,300 |
400 |
| 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 |
5,465 5,535 2,110 |
5,565 5,635 2,150 |
100 100 40 |
| Capital gains tax annual
exempt amount: Individuals etc Other trustees |
7,700 |
7,900 |
200 |
| Inheritance tax threshold | 250,000 |
255,000 |
5,000 |
| Pension schemes earnings cap | 97,200 |
99,000 |
1,800 |
| Taxable bands 2002-03 (£) |
Taxable bands 2003-04 (£) |
||
| Starting rate 10% |
0 – 1,920 |
Starting rate 10% | 0 – 1,960 |
| Basic rate 22% |
1,921 – 29,900 |
Basic rate 22% | 1,961 – 30,500 |
| Higher rate 40% |
Over 29,900 |
Higher rate 40% | Over 30,500 |
| Corporation tax profits 2003-04 (£) |
|
| 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 |
National Insurance changes from 6 April 2003
| 2002/2003 |
2003/2004 |
|||
| Class 1 Employees | ||||
| On first | £89 pw |
Nil |
£77 pw | Nil |
| Between | £89 - £585 pw |
10% |
£89 - £595 pw | 11% |
| Over | £585 pw |
Nil |
£595 pw | 1% |
| Class 1 Employers | ||||
| On first | £87 pw |
Nil |
£89 pw | Nil |
| Between | £87 - £585 pw |
11.8% |
£89 - £595 pw | 12.8% |
| Over | £585 pw |
11.8% |
£585 pw | 12.8% |
| Class 2 Self employed | ||||
| Flat rate | £2 pw | £2 pw | ||
| Class 3 Voluntary | ||||
| Flat rate | £6.85 pw | £6.95 pw | ||
| Class 4 Self employed | ||||
| On profits between | £4,615 - £30,420 pa | 7% | £4,615 - £30,940 pa | 8% |
| above £30,940 | 1% | |||
Stamp taxes from Budget day to 30 November 2003
| Transfers of property (consideration paid) | |||
| Rate (%) | All property | Disadvantaged areas | |
| Residential | Non-residential | ||
| Zero | £0 - 60,000 | £0 - 150,000 | All |
| 1 | Over £60,000 - 250,000 | Over £150,000 – 250,000 | |
| 3 | Over £250,000 – 500,000 | Over £250,000 – £500,000 | |
| 4 | Over £500,000 | Over £500,000 | |
New leases (lease duty)
| Duty on rent | |
| Term | Rate of charge on average annual rent |
| Not exceeding 7 years | 1 per cent * |
| More than 7 years but not exceeding 35 years | 2 per cent |
| More than 35 years but not exceeding 100 years | 12 per cent |
| More than 100 years | 24 per cent |
| * applies only where the rent exceeds £5,000 per annum |
Stamp taxes from 1 December 2003 (implementation of stamp duty land tax)
Transfers of property (consideration paid)
| Rate % | All
land in the UK |
Land
in disadvantaged areas |
||
| Residential | Non-residential | Residential | Non-residential | |
| Zero | £60,000 | £150,000 | £150,000 | All |
| 1 | Over £60,000 – 250,000 | Over £150,000 – 250,000 | Over £150,000 – 250,000 | |
| 3 | Over £250,000 – 500,000 | Over £250,000 – 500,000 | Over £250,000 – 500,000 | |
| 4 | Over £500,000 | Over £500,000 | Over £500,000 | |
| Property that is not land, shares or interests in partnerships will no longer be subject to stamp duty. | ||||
New leases
| Proposed duty on rent* | ||
| Rate (%) | Net
present value of rent |
|
| Residential | Non-residential | |
| Zero | £0 - £60,000 | £0 - £150,000 |
| 1% | Over £60,000 | Over £150,000 |
| * Subject to consultation | ||
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2003-04.