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I would like to draw your attention to a number of important changes to Income Tax, Capital Gains Tax and Inheritance Tax, brought about partly by Alistair Darling’s Pre-budget Statement last Autumn, and partly by his Budget Announcement of 12 March, 2008.

The application of Capital Gains Tax has been completely overhauled. There is a new flat rate of 18%, replacing the old rate of 40%. However, indexation relief and taper relief have both been abolished. These changes apply to individuals, trustees, executors and personal representatives, but not to Companies, whose gains are still subject to Corporation tax rates. Business taper relief previously allowed many disposals to be taxed at only 10%. There is now a new Entrepreneurs’ 10% rate which is more restrictive and applies to the first £1m of eligible gains.

The individual Inheritance tax threshold has been raised from £300,000 to £312,000. This rise is in conjunction with the previous move to allow married couples or civil partners to pass on any unused Inheritance tax allowance to the survivor.

The income tax basic rate has fallen from 22% to 20%, but this has been offset by the removal of the 10% starting rate on earned income. The annual personal allowance for those under 65 has risen from £5,225 to £5,435, whilst those aged between 65 and 74 will receive an increase of £1,480, and those aged 75 or over an increase of £1,490.

There have also been significant changes made to rules relating to Individual Savings Account (ISAs), Corporation Tax and dividends.

We have provided an overview of the 2008 Budget in an article below. You can also click here to access a full budget summary or tax facts card. If you feel that you would like a review of your arrangements, please contact us to discuss them.

Hugh Younger
Senior Partner
hugh.younger@murraybeith.co.uk