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Blog posts tagged Business rates

Pre-Budget Report 2009

December 15, 2009 by Raphael Coman

In his last Pre-Budget Report before the general election, Chancellor Alistair Darling unveiled a number of measures aimed at bringing about economic recovery in the UK economy.

For individuals, the allowances will remain frozen at 2009/10 levels, although the pledged increase in income tax for those earning over £150,000 will be introduced on 6 April 2010.

There will be a rise in National Insurance of 0.5% from 6 April 2011, affecting all those with earnings over £20,000. The temporary VAT rate cut will cease on 31 December 2009 and at the same time the stamp duty holiday will end. Due to a lack of rise in property prices the inheritance tax allowance will be frozen at £325,000 until 2011.

For businesses there will be a deferral of the increase in corporation tax and an extension of the empty property relief and of the Enterprise Finance Guarantee for a further year.

Income tax rates and allowances
Income tax rates and thresholds for 2010/11 will be unchanged from 2009/10, with the notable exception of a new 50% rate that will apply to income above £150,000. With the tax thresholds static, the effect of any inflation will cause a real terms reduction on net income.

Pension contributions
The proposals to restrict the pension relief on contributions for those earning over £150,000 were confirmed for 6 April 2011. The Chancellor also announced an immediate measure to prevent high earners from avoiding the restriction by receiving pension payments instead of salary before the new rules take effect. This anti-avoidance move applies to those with income over £130,000.

National Insurance
The increase of 0.5% in National Insurance planned for 6 April 2011 has increased to 1%; double the amount announced in the 2008 Pre-Budget Report. The higher rates apply to employees, employers and the self-employed from 6 April 2011. The limit at which an individual starts to pay national insurance will also increase by £570 on the same date. As an overall effect, those with earnings below £20,000 will not be any worse off.

Corporation tax
At last – some good news. The 1% rise in corporation tax for small companies, which was due to take effect on 1 April 2010, has been postponed until 1 April 2011.

VAT
The VAT rate will revert to 17.5% from 1 January 2010, but no other VAT changes are proposed. For businesses using the flat rate scheme, the percentages are also changing on 1 January 2010. Most flat rates will go back to being the same as they were before 1 December 2008. For certain businesses it may be beneficial to leave the scheme in the new year, which can be done voluntarily. We can help you to decide whether it will stay worthwhile to use the flat rate.

Business rates
The exemption from business rates will be extended one year to 31 March 2011 for all empty properties with a rateable value below £18,000. The increase in the threshold from £15,000 to £18,000 reflects the rise in rateable values from 1 April 2010.

Furnished Holiday Lettings
The tax benefits available to furnished holiday lettings will be removed from 1 April 2010 for companies and 6 April for unincorporated businesses. The changes will not affect hotels or bed and breakfasts. The withdrawal of the treatment will mean that with respect to furnished holiday lettings:

  • Losses will only be available to reduce profits from other property income.
  • Profits will not count towards income on which pension relief can be obtained.
  • Special treatment for capital gains tax purposes will no longer continue.

Stamp duty
The increase in the limit on which an individual starts to pay stamp duty, announced in September 2008, will finish at the end of the year. From 1 January 2010, stamp duty will be payable at 1% on residential properties over £125,000.

Stamp duty is normally charged at the completion date or the date on which an individual takes possession of the property. To avoid stamp duty of 1%, transactions on properties between £125,000 and £175,000 will usually need to be completed before 31 December 2009.

Inheritance Tax
The threshold on which an estate is exempt from inheritance tax was due to rise to £350,000 on 6 April 2010, but it will now be left at £325,000 for a further year. The government has sited a lack of improvement in the property market as a reason for the change.

Other tax changes
Backing from the government for loans to small businesses through the Enterprise Guarantee Scheme will be extended by another year to 31 March 2011.

Banks will pay tax on all discretionary bonus over £25,000 at 50%. The 'super-tax' will be payable by banks in addition to income tax and will take immediate effect.

An employee's use of an electric car will be a tax-free benefit in kind for five years from 6 April 2010. In addition, where a company acquires a new electric van from 1 April 2010, it will be able to deduct the full cost from its profits for tax purposes. Meanwhile, the tax cost of providing non-electric cars and vans as a benefit will increase from the same date.

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How to set up a business at home - regulatory

November 18, 2009 by Tim Haggard

My first blog post on setting up a business at home proved popular - I thought I would follow it up with some tips on the regulatory side to working from home.

  1. Decide whether to trade as a sole trader or to set up a limited company.
  2. Incorporate a company using a formation agent (e.g. @UKplc) or an accountant. This is easy and you should not have to pay more than £150 - including disbursements.
  3. As a sole trader, you will need to register as self employed with HM Revenue & Customs.
  4. You will be able to offset a portion of your home costs against your profits. This is a great way of reducing tax.
  5. VAT registration – this is compulsory if your sales are greater than £70,000. You can register voluntarily if wish to reclaim VAT suffered on purchases. It’s a complex area and you should seek the advice of an accountant. Make sure your accountant is set up to register and file returns online for you.
  6. PAYE registration – you will need to do this if you plan to pay yourself and/or your staff a salary. Again, use an accountant and make sure that the accountant is set up to make all the necessary submissions online.
  7. Home insurance – make sure that your building and contents policy covers you for working from home. Similarly, make sure that your car insurance covers business use. There should be no/minimal extra cost.
  8. Liability insurance – if you need it, you might want to make sure that it covers Public Liability Insurance at your home, particularly if you plan to regularly host clients, suppliers and/or staff.
  9. Business Rates – there is an element of scale to consider here – you on a laptop on the sofa is not a problem. Five staff turning up every day to work in the spare-room may be. If in doubt, check out your local council’s position.
  10. Registered Office – if you set up a company, you will need to have an “official” address. If you use your home address, you will need to display the company name outside your front door. The sign can be business card size. Alternatively, use your accountant or virtual office service.
  11. Make a note in your diary of the dates and deadlines that matter – particularly on the submission of official documents - because you get fined if you are late.

I'm always looking for new topics to blog about so if you have any suggestions - do get in touch or leave a comment below.

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