Pre Budget Report December 2006
Gordon Brown presented what may be his last pre-budget report to Parliament today.
There are no dramatic surprises in the proposed changes to taxes, although the Chancellor
has raised his tax take by £2bn. We have summarised below some of the announcements
that directly affect the tax and other duties we pay.
As always if you need more information on any of the issues raised by the Pre Budget
Report please call.
Changes to Tax Allowances and rates
Income Tax Allowances
All income tax allowances are to be increased in line with inflation. For 2007-2008
the new rates are:
Personal Allowance - under 65 years £5,225
Personal Allowance - age 65 to 74 years £7,550
Personal Allowance - age 75 and over £7,690
The income limit for age related allowances is now £20,900.
National Insurance
Minor increases in the lower earnings limit and no increase to basic Class 1 contribution
rates.
The self employed weekly contribution will rise by just 10p to £2.20. Class
4 contributions based on self employed earnings between £5,225 and £34,840
will continue to be charged at 8%.
Savings and Family Matters
Savings - Reform of the ISA regime
· making ISAs permanent with an overall annual investment limit of £7,000.
· bringing Personal Equity Plans within the ISA rules
· allowing child trust funds to roll over into ISAs on maturity
• allowing transfers from the cash to stocks and shares component of ISAs.
Families with children
· From April 2007 the value of Child Tax Credit will increase by £80
to £1,845 per year.
• From April 2009 every mother-to-be will become eligible for Child
Benefit from week 29 of their pregnancy. The additional benefit will amount up to
£200.
Environment and Climate Change
Road fuels - increase in excise duty
From 7 December 2006 the effective rate of excise duty for road fuels will be increased
by 1.25 pence per litre. (This is in line with the inflationary increases published
in the Budget 2006). The same increase will be applied to bio-fuels.
Air Passenger Duty Rates will be increased from 1 February 2007
The new rates of duty will be:
· For the lowest class of travel: Passengers flying to destinations
in Europe will pay £10, to other destinations £40.
• For other than the lowest class of travel: European travellers will
pay £20, to other destinations £80.
Extension to landlord's energy-saving allowance
Individual landlords and corporate landlords who let residential properties and
pay either income tax or corporation tax will benefit from the new proposals. The
changes are:
· availability will be extended to 2015
· qualifying expenditure will now include installation of floor insulation
· the present maximum allowance of £1500 will be applied to each
property rather than to each building, and
• the allowance will be made available to corporate landlords who let
residential properties
These changes will take effect on or after 6 April 2007 but may be subject to State
Aid clearances.
Free insulation and central heating
The Chancellor has pledged to offer a further 300,000 households free central heating
and insulation.
Tax free energy sales
If you have installed micro generation technology in your home, and receive payment
from energy suppliers for the sale of surplus of power, you will be pleased to know
that legislation is to be included in the Finance Bill 2007 to exempt this sale
of surplus power from income tax.
This exclusion will not apply to cases where surplus power is sold in the course
of a trade.
Zero Carbon Homes
The Pre Budget report has announced a time limited exemption from stamp duty for
most new zero carbon homes. Full details will be issued in the 2007 Budget.
Other Issues
UK Real Estate Investment Trusts (UK-REITs)
Measures are to be introduced on or after 1 January 2007 that will make it easier
for newly established companies to become UK-REITs.
Anti-avoidance measures
Certain avoidance schemes that have been notified to HMRC, as now required by law,
are to be closed as from 6 December 2006. They include arrangement to avoid corporation
tax and use of particular capital losses.
Stamp Duty Land Tax Anti-avoidance measures.
A number of schemes designed to avoid stamp duty land tax will cease to be effective
on or after 6 December 2006. There are transitional provisions to help those who
entered into contractual commitments before 2 p.m. on 6 December 2006.
Construction Industry
In his Budget speech earlier this year the Chancellor delayed the introduction of
the new Construction Industry Tax Scheme until April 2007. The Chancellor today
confirmed that the new scheme will operate as stated from April 2007.
DISCLAIMER - PLEASE NOTE: The ideas shared with you here are intended to inform
rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies
we have outlined may be beneficial it is important that you contact us before implementation.
If you do or do not take action as a result of reading this newsletter, before receiving
our written endorsement, we will accept no responsibility for any financial loss
incurred.
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