FL Memo Ltd © 2008

Tax Memo Newsletter Issue 1 (PBR 2008)

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Income tax

 

Carry back of losses

TM ¶2476

As a one year extension, unincorporated traders will be able to carry back trading losses declared in the 2008/09 tax year for 3 years opposed to the standard previous year only.  This will be done taking later years first. The losses that can be carried back to 2005/06 and 2006/07 will be capped at £50,000 in total.

 

 

Automatic company cars provided to disabled employees

TM ¶3290

Disabled employees are liable to a reduced income tax charge when provided with an automatic company car by the employer, as the lower CO₂ emissions of an equivalent manual car can be used when calculating the benefit.

From 6 April 2009, the benefit calculation will be based on the list price of an equivalent manual car, hence reducing the tax charge further.

 

 

Unapproved share schemes – shares acquired at undervalue

TM ¶3354

Shares received outside an approved share scheme are subject to income tax in many situations. From the date that the Finance Act 2009 receives Royal Assent, the following changes take effect to remove unfair tax charges which can result even where the employee makes no profit on the transaction:

a. when employer company shares are to be paid for in instalments, and the shares are sold before all of the instalments have been paid, a tax charge will no longer arise on the employee if no profit is made. However, if the employee is released by the employer from the obligation to pay any outstanding instalments, a tax charge may still arise;

b. on the sale by an employee of nil or partly-paid shares, no tax charge will apply where the employee has made no profit overall on the shares; and

c. where a scrip issue or bonus issue is made so that the employee receives new shares in proportion to their existing shareholding, no tax charge will occur. 

 

 

Pension limits

TM ¶3768, 9972

The lifetime allowance and annual allowance for pension purposes have been set for the years from 2011/12 to 2015/16.  Both of these will be frozen at the rates applicable in 2010/11 being £1.8 million and £255,000 respectively.

 

 

Rates and allowances

TM ¶9966, 9967

A series of changes over the next 3 years have been announced.

2009/10

The basic personal allowance will increase to £6,475 and the first £37,400 of taxable income beyond that will be taxed at the basic rate.  This will make the higher rate threshold £43,875 for a taxpayer in receipt of the basic personal allowance. The other allowances will increase as follows.

 

		£
Personal allowance – 65 to 74		9,490
Personal allowance – over 74		9,640
Blind person’s allowance		1,890
Married couple’s allowance		6,965
Income limit for age related allowances		22,900
Minimum amount of married couple’s allowance		2,670
Starting rate limit for savings		2,440

 

2010/11

The personal allowance will be reduced for those with gross income in excess of £100,000.  For those earning up to £140,000 this reduction will be calculated as £1 for every £2 of income above the limit, but the minimum allowance will be half of the personal allowance.  For those earning over £140,000 the rate of reduction will be the same but the allowance can be extinguished entirely.

 

2011/12

A new rate of tax will be introduced at 45% for those with gross income over £150,000. The dividend rate will increase to 37.5%.