Key Points announced on the 24th November 2008.

• VAT reduced from 17.5% to 15% from 1st December 2008 until 31st December 2009. For users of the flat rate schemes new rates have been published by HMRC and these apply from 1st December.
• Personal allowance of £6035 is to increase to £6,475 from 6th April 2009 (the higher level of allowance introduced in the wake of the removal of the 10% tax rate has been made permanent).
• From the 6th April 2009 the 40% tax rate will start at an income level of £43,875 following the changes.
• The 21% corporation tax rate for small companies will not be increased to 22%, as planned, from the 1st April 2009. The increase is to be delayed until 1st April 2010.
• A 2p per litre fuel duty increase comes into effect on the 1st December 2008 and the duty on alcohol and cigarettes will rise to match the reduction in VAT on the same day.

The Future

• The personal allowance will be restricted for those with incomes over £100,000 per annum from April 2010. For individuals on an income of £146,475 per annum and above the allowance is reduced to nil, costing the individual about £2,600 in extra tax .
• A new tax rate of 45% for individuals on incomes above £150,000 is to be introduced from April 2011.
• National Insurance contributions paid by employers, employees and the self-employed are to increase by 0.5% from April 2011. This change will impact everybody who pays National Insurance on their earnings and creates a top rate of tax and NIC of 46.5% (45% tax and 1.5% NIC).

And for small businesses

• A trading loss in a year can at present be carried back one year for relief against prior year profits to get a repayment of tax. This relief is to be extended to allow a carry back of three years up to a limit of £50,000 losses. Companies can claim this relief for accounting periods ending between now and November 2009 and non incorporated businesses can claim this relief in the tax year 2008/2009.
• HMRC have announced new arrangements for businesses experiencing temporary financial difficulties which will allow tax payments to be spread over a timetable they can afford. The arrangement will apply to all taxes including corporation tax, income tax, VAT and National Insurance. The HMRC helpline service for this facility is 0845 302 1435.
• Empty properties with a rateable value below £15,000 will be exempt from business rates for the tax year 2009/2010.
• Special schemes to make bank lending easier were announced with particular help for exporters.

Income shifting (husband and wife companies)

• Planned changes and new rules for the tax treatment of husband and wife companies have been deferred for the time being although the matter will be kept under review by HMRC.

A final note and reminder on capital allowances.

This change, although not announced as part of the pre budget statement, it was in the 2007 Budget, is worthy of a reminder. From April 2008 there is a £50,000 annual investment allowance available for capital expenditure on plant and machinery. This means that up to £50,000 can be invested in plant and machinery (other than cars) and the whole amount available for deduction from trading profits in that year.