Increase in personal tax allowance

The Chancellor, Alistair Darling has announced details of the compensation the government is to offer taxpayers who have been hit by the scrapping of the 10p income tax starting rate.The basic rate personal tax allowance is to rise by £600 to £6,035. As a result basic rate taxpayers will save £120 annually.Higher rate taxpayers will see no difference in the amount of tax they pay as the level at which they enter the higher rate tax band is reduced by £1200 which negates the effect of the increased personal allowance.The increase in the allowance will not come into effect until September 2008, althought it is to be backdated to 6 April 2008 . Thus Employees taxed at basic rate will receive a £60 lump sum tax repyament in September , followed by £10 a month for the rest of the year.

As from 6th April 2008, the annual allowance is increased to £7,200. £3,600 may be invested into a cash ISA compared to £3000 last year.

Major changes to the Capital Gains tax regime came into force on 6th April 2008. Some taxpayers will gain but many others will lose from the changes.

If you are thinking of selling business assets in the foreseeable future or have owned assets for many years it would be sensible to discuss with your Accountant how you may ( or may not) be affected .After much pressure from the Professional Accountancy bodies and many other business groups, the Chancellor has included an ‘ entrepreneurs allowance' in the new provisions which will help many small business people when they sell or close their business.

The new CIS rules are still causing problems for many contractors as regards verification of a subcontractor's status. It is not enough to believe that the fact that a subcontractor has a UTR (unique Taxpayer's reference number) means that they may be paid gross. Nor does the existence of a contract between a contractor and subcontractor automatically confer gross payment status. There are a whole host of indicators that the Revenue will look at when examining this. These indicators include:    

• Who is responsible for organising the work?
• How has the job been priced - e.g. day rate, per contract?
• Who provides the tools?
• Who takes responsibility should the job go wrong or overrun either costs or time?
• For how many contractors does the subcontractor work?

The above is only a sample of the questions that will be asked of both the contractor and subcontractor. If the answers given from both sides do not agree, this immediately will lead to further questions. Each case needs to be looked at on its own specific facts, even though the Revenue would prefer to use a blanket approach.  Therefore , if you are subject to any questioning from the Revenue on this matter, it is essential to give the reply careful consideration and preferably take professional advice. The penalties can be very severe should the Revenue decide the wrong basis was applied .