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Income shifting legislation delayed
Company Shareholder-Directors where expecting legislation to address where profits where divided in a Company and effectively "shifted" income from the prime income generator. The legislation was expected for
the 2009/2010 tax year following HMRC failing to win in the "Arctic Systems" case. The legislation has now been
delayed and it is not known when it will be enacted but could be in force for the 2010/2011 tax year, although it is still unclear.
Significant Changes to Income Tax
Tax Year 2009/2010
The main personal allowance will rise to £6,475 and the basic rate limit will increase from £34,800 to £37,400. These improvements are countered by a substantial increase in the upper level at which full rate NICs are paid — from £40,040 to £43,875.
Tax Year 2010/2011
Personal allowances will be restricted for high earners in a complex two-stage approach:
1. If your gross income is between £100,000 and £140,000, your personal allowance will be reduced by £1 for each £2 of income over £100,000, subject to a maximum total reduction of half the personal allowance.
So assuming a personal allowance of £6,600, your personal allowance will be halved (to about £3,300) if your income is above about £106,600.
2. If your gross income exceeds £140,000, your personal allowance will be reduced again by £1 for each £2 of income over £140,000. As a result, you will have no personal allowance if your income is more than around £146,600.
These phased reductions create two bands of income about £6,600 wide, where the effective marginal tax rate is 60%.
Tax Year 2011/2012
NIC rates for employees, employers and the self-employed will rise by 0.5%.
• There will be a new 45% income tax rate (37.5% for dividends) for taxable income above £1 50,000.
Some changes are not due to take effect until after the next general election. However, such is the hole in the public finances
that it makes sense to assume the proposals will become law and start planning accordingly:
• If you are married or in a civil partnership, make sure that you are taking maximum advantage of, independent taxation.
• If you could be caught by the personal allowances restriction, review whether it will be possible to avoid the 60% marginal rate
band.
• If paying 45% income tax from 2011/12 is a possibility, think about bringing forward income into an earlier tax year.
• Capital gains, taxed at 18%, might be preferable to income
Ashfield Launch New Website
Our new website is now complete providing daily accountancy news direct from Accountingweb. You will also find useful links to other sites under our "other resources" page.
New practice
Not just yet !
Appointments
The team of Mark, Emma, Rob and Sam has now expanded to cope with the increased request for our services. Tracey has joined the team to assist with data entry, payroll and general accounts processing. The sub-contract accountants have been increased to include Lisa who is now helping Chris & Phil provide the additional assistance to management and compliance accounts services.
Filing deadlines
The next filing deadline is for P35 End Year PAYE returns that must be with HMRC by the 19th May 2009.
We will be working on these shortly
Following on from last year any paper Tax Returns have to be with HMRC by the 31st October 2009. The filing deadline for electronic returns is still 31st January 2010.
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As always there is a free initial consultation for any prospective client who wishes to see if we are the right accountancy firm for them
