Budget 2007
Mar 30, 2007
Author:Annabel O'Sullivan

There are the usual increases in allowances and closing of tax loopholes. Anyone who was hoping to avoid buying an annuity with their pension fund and pass the fund on to their children has had that plan blocked in most cases. Other changes include a new deadline – 31st October – for all tax returns to be completed.

For the 2007/2008 tax year the single person’s allowance is £5225. From 2008/9 the 10% initial tax band has been abolished completely and the lower rate is down to 20% from that year from 22% this year. This will be payable on income after deduction of allowances up to £35,800. In 2006/2007 employees pay national insurance on their annual earnings up to £33,540 at 11%. From April 2009 employees will pay NI and basic rate tax on earnings up to £43,000. The bands for both tax and NI will be aligned. National insurance is levied at 1% on that sum and above making the effect combined upper rate for 2007/2008 41%. Below that figure, national insurance contributions are 11%. For businesses from 1st April 2007 the level of turnover at which registration for VAT becomes compulsory is now set at £64,000.

Annabel O'Sullivan says “Inheritance tax for 2007/2008 is payable when the estate is £300,000 or over. However, we can help advise you as to how to minimise the tax particularly through use of a will, leaving up to that sum to children rather than a surviving spouse, to take advantage on the first death of that nil rate band. In terms of pension contributions for 2007/2008, individuals can put 100% of their annual earnings into a pension scheme or £225,000 whichever is the lower. This can be useful if an inheritance is received and the individual would like to use all their annual tax band for the pension or they live on investment or a spouse’s income and wish to save the entirety of their earnings. There were also changes to corporate taxation. Also, the Finance Act 2007 will define a Managed Service Company and treat income received from such an entity as subject to both PAYE and national insurance contributions from 6 April 2007. Any clients who make use of such companies should contact us for advice or on any other budget topic.

Call Annabel on 01494 521301