Introduction

In his eleventh and almost certainly final Budget, Gordon Brown produced more than his normal crop of surprises. As usual, there were many more announcements in the 81 Budget Notes and press releases than were contained in the Chancellor’s speech itself. Several had already been heralded in last December’s
Pre-Budget Report (PBR), but many came as a surprise. Those with the greatest impact included the following:

  • The personal income tax regime will be reformed. This will include a reduction in the basic rate of tax to 20% from 2008/09, the restriction of the 10% starting rate of tax to savings income and the bringing into line of higher rate income tax and national insurance thresholds.
  • The corporation tax rate for small companies will rise in stages to 22% as part of a move to prevent tax-driven incorporation. The increase in tax rates is accompanied by new anti-avoidance measures aimed at curbing managed service companies.
  • For large companies, the mainstream corporation tax rate will move in the opposite direction, with a 2% reduction to 28% from 2008.
  • The corporation tax changes are accompanied – and partly financed – by reform of the capital allowances regime. This will see the abolition of two long-standing allowances for buildings and a reduction in the writing-down allowance for most assets. There will also be increases to the rates of research and development tax credits.
  • Changes will be made to the rules for alternatively secured pensions (ASPs) as foreshadowed in the PBR. The tax treatment of transferred ASP funds on death remains penal, although the IHT treatment is marginally better than originally proposed. Also on the pensions front, the Chancellor has removed tax relief for individual contributions to pension-based personal term assurance policies.
  • The Chancellor announced that the inheritance tax nil rate band will rise to £350,000 in 2010/11.
  • The ISA investment limit will increase, but by just £200, and only from 2008/09.
  • A plethora of anti-avoidance measures cover everything from commission-rebated life policies to the purchase of corporate losses.
bullet point Introduction
bullet point Personal taxation
bullet point Pensions and employment taxation
bullet point Business taxes
bullet point Capital taxes
bullet point VAT
bullet point Self-assessment and compliance
bullet point National insurance contributions
This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act is passed. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.