<html> <head> <meta http-equiv=Content-Type content="text/html; charset=unicode"> <link rel=Edit-Time-Data href="PreBudgetNov08_files/editdata.mso"> <link rel=themeData href="PreBudgetNov08_files/themedata.thmx"> <link rel=colorSchemeMapping href="PreBudgetNov08_files/colorschememapping.xml"> <style> <!-- .Section1 {page:Section1;} --> </style> </head> <body bgcolor="#FFFFFF" link=blue vlink=purple class="Normal" lang=EN-GB> <div class=Section1> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td width="100%" class="Normal"><p><a name=top></a><b><span style='font-size:14.0pt; font-family:&quot;Arial&quot;,&quot;sans-serif&quot;;&quot;Times New Roman&quot;'>Northams Chartered Accountants</span></b></p></td> <td class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman"'><img id="_x0000_i1025" src="406.jpg"></span></p></td> </tr> </table> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td width=2 colspan=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1026" src="box_tl.gif"></span></p></td> <td width="100%" class="Normal"><p align=center style='text-align:center'><b><span style='font-size:11.0pt;font-family:"Arial","sans-serif";"Times New Roman";color:black'>November 2008 Pre-Budget Report</span></b></p></td> <td width=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1027" src="box_tr.gif"></span></p></td> </tr> <tr> <td width=1 class="Normal"></td> <td colspan=2 valign=top class="Normal"><p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>There was a great deal of press speculation, prior to the announcements made yesterday, that Mr Darling was to unleash a number of tax cuts. </span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The major, predicted cut to VAT was confirmed, as was the introduction of a 45% income tax rate for high earners to help pay for it!</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>We have listed below a number of the various tax changes and how they affect individuals and businesses.</span></p></td> <td width=1 class="Normal"></td> </tr> </table><br> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td width=2 colspan=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1030" src="box_tl.gif"></span></p></td> <td width="100%" class="Normal"><p align=center style='text-align:center'><b><span style='font-size:11.0pt;font-family:"Arial","sans-serif";"Times New Roman";color:black'>Personal tax changes</span></b></p></td> <td width=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1031" src="box_tr.gif"></span></p></td> </tr> <tr> <td width=1 class="Normal"></td> <td colspan=2 valign=top class="Normal"><p><strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>VAT</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The standard rate of VAT is reduced from 17.5% to 15% on 1 December 2008. This is a temporary reduction until 1 January 2010 when the rate will revert to 17.5%.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>This should reduce the price of VATable goods and services that you buy. However this will only happen if the businesses who sell these goods and services pass on the 2.5% saving. </span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>If the savings are passed on, it will reduce the cash cost (inc VAT) of a £50 VATable purchase to £48.94.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Personal Allowance 2009-10</span></strong><span style='font-size:9.0pt;font-family: &quot;Arial&quot;,&quot;sans-serif&quot;'><br> From the 6 April 2009 the income tax personal and age related allowances are increased to:</span></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Age under 65 - £6,475</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Age 65 to 74 - £9,490</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Age 75 and over - £9,640</span></li> </ul> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The income limit for aged related allowances (over 65's) is increased to £22,900.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Blind person's allowance increased to £1,890.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Personal Allowance 2010-11</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The personal allowance will be reduced for individuals with gross incomes, before personal allowances, above £100,000 and further reduced for gross income above £140,000. This measure will progressively reduce the personal allowance available to these high income groups. It will also produce a marginal rate of tax of 60%.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Income Tax Rates 2009-10, taxable bands</span></strong></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Starting savings rate 10%* - £0 to £2,440</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Basic rate 20% - £0 to £37,400</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Higher rate 40% - Over £37,400</span></li> </ul> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>* There is a 10p starting rate for savings only. If an individual s non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income. </span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Income Tax Rates 2011-12</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>A new tax rate of 45% is to be introduced on income over £150,000.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>A new 37.5% rate of tax will apply to taxable dividend income above £150,000</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>National Insurance changes 2009-2010</span></strong></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Class 1 contributions: Lower earnings limit increased to £95 per week, the primary threshold increased to £110 per week, and the upper earnings limit increased to £844 per week. No change to NIC rates.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Class 2 contributions: Increase in weekly rate to £2.40; small earnings income exemption increased to £5,075</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Class 3 rate: Increased to £12.05 per week.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Class 4 rates: Rates unchanged; lower profits limit increased to £5,715 per year; upper profits limit increased to £43,875 per year.</span></li> </ul> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Note: The number of qualifying years required to receive a full State Pension falls from 44 for a man and 39 for a woman to 30 for both men and women from 6 April 2010.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>National Insurance changes 2011-2012</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Class 1 and Class 4 NIC's to be increased by 0.5%. Both employers and employees rates will be affected.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Child Benefits </span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Increases due from April 2009 have been brought forward to 5th January 2009. The new rates are:</span></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Eldest or only child £20 per week</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Other children £13.20 per week</span></li> </ul> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Pensions tax relief 2009-10</span></strong><span style='font-size:9.0pt;font-family: &quot;Arial&quot;,&quot;sans-serif&quot;'><br> Annual allowance increased to £245,000</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Lifetime Allowance increased to £1.75m</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Fuel Duty</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>From 1 December 2008 the main fuel duty will increase by 2 pence per litre. The reduction in the standard rate of VAT to 15% should compensate for this increase. </span></p><br> </td> <td width=1 class="Normal"></td> </tr> </table> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td width=2 colspan=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1034" src="box_tl.gif"></span></p></td> <td width="100%" class="Normal"><p align=center style='text-align:center'><b><span style='font-size:11.0pt;font-family:"Arial","sans-serif";"Times New Roman";color:black'>Business tax changes</span></b></p></td> <td width=2 class="Normal"><p><span style='font-family:"Arial","sans-serif";"Times New Roman";color:black'><img border=0 id="_x0000_i1035" src="box_tr.gif"></span></p></td> </tr> <tr> <td width=1 class="Normal"></td> <td colspan=2 valign=top class="Normal"><p><strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>VAT</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>We have set out below a few of the advantages and disadvantages for businesses as a direct result of the reduction in the standard rate of VAT to 15% on 1 December 2008.</span></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>If you have not yet registered your business for VAT the reduction today should marginally improve your profitability; as long as your suppliers pass on the VAT decrease.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>If you are registered for VAT you will not see any improvement in your profitability unless you decide to retain part or all of the VAT rate reduction, by minimising any price reduction to your customers.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>For many years now the VAT fraction, the amount you would multiply a VAT inclusive figure by to calculate the 17.5% VAT amount was 7/47. The new fraction to calculate the 15% VAT included in a VAT inclusive figure is 3/23.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Don't forget to change the standard rate of VAT in your accounts software to 15% for transactions dated after 1 December 2008!</span></li> </ul> <p><strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Other VAT issues - effective from 1 April 2009</span></strong></p> <p><span style='font-size:9.0pt;font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;'>1.<span style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp; </span></span><span style='font-size:9.0pt;font-family:&quot;Arial&quot;,&quot;sans-serif&quot;; &quot;Times New Roman&quot;'>Businesses with annual retail sales of up to £130m will be able to apply to use one of the five retail schemes. Presently these schemes are limited to businesses with retail sales up to £100m. </span></p> <p><span style='font-size:9.0pt;font-family: &quot;Arial&quot;,&quot;sans-serif&quot;;'>2.<span style='font:7.0pt "Times New Roman"'>&nbsp;&nbsp;&nbsp;&nbsp; </span></span><span style='font-size:9.0pt;font-family:&quot;Arial&quot;,&quot;sans-serif&quot;; &quot;Times New Roman&quot;'>The entry and exit rules for the flat rate scheme are simplified. The rates applied to the scheme are revised from 1 December 2008 to reflect the change in the standard rate on the same date.</span></p> <p><strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Corporation Tax</span></strong><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'><br> The planned increase in the small companies rate of corporation tax from 21% to 22 % from 1 April 2009 has been deferred until 1 April 2010.</span></p> <p><strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Income Shifting</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The unpopular proposal to introduce legislation on 6 April 2009 to counter income shifting, has been deferred.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Extension of carry back of loss relief</span></strong><span style='font-size:9.0pt; font-family:&quot;Arial&quot;,&quot;sans-serif&quot;'><br> This extension to loss relief's already available will enable both incorporated and unincorporated to carry back current losses, that were previously restricted to set off against the preceding year's profits only, to the previous 3 years profits. The following bullet points summarise the main points:</span></p> <ul type=disc> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>The relief is available for one year only. For limited companies, trading losses in an accounting period ending between 24 November 2008 to 23 November 2009. For unincorporated business losses agreed for a trading period that forms the basis period for 2008-09.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>HMRC will make repayments occasioned by claims for the new relief on or after Budget Day 2009.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>The amount of the loss that can be carried back is limited to £50,000.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>Losses will be applied to the latest of the three years first.</span></li> <li><span style='font-size:9.0pt;font-family:"Arial","sans-serif";"Times New Roman"'>As this is an extension to existing loss relief legislation, the current relief's are still available.</span></li> </ul> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Capital Allowances and Cars</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The Government is pressing ahead with changes to the way in which businesses can claim tax relief for the purchase of cars.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The new rules will have effect from 1 April 2009 for companies and 6 April 2009 for unincorporated businesses.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Essentially allowances will be given from the April 2009 dates according to the CO2 rating of the vehicle. Cars with emissions over 160g/km will be limited to a 10% writing down allowance. All other vehicles will attract higher tax allowances depending on their CO2 emissions. It will still be necessary to adjust claims where there is an element of private use.</span></p> <p><br> <strong><span style='font-size:10.0pt;font-family:"Arial","sans-serif"'>Business Payment Support Service</span></strong><br> <span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>From 24 November 2008 HMRC are introducing a new Business Payment Support Service. The telephone number is 0845 302 1435.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>The declared aim of the new service is to &quot;... meet the needs of businesses affected by the current economic conditions.&quot;.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>On the face of it this would seem to be a step in the right direction. So if you have genuine cash flow problems and are going to find it difficult to meet any payment due to HM Revenue &amp; Customs, PAYE/NIC, or other business taxes, give them a call. </span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Apparently if you reach agreement for extended payment terms you will not be charged late payment surcharges, but you will be charged interest.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>This new service should not be contacted if you have an existing arrangement in place that you wish to change - call the department that you originally contacted.</span></p> <p><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>Don't wait for court action to be taken - the sooner you get in touch the more likely you are to achieving an agreement to pay your dues by instalments.</span></p><br> </td> <td width=1 class="Normal"></td> </tr> </table> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td colspan=3 class="Normal"></td> </tr> <tr> <td width=1 class="Normal"></td> <td valign=top class="Normal"><p><strong><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'>DISCLAIMER - PLEASE NOTE:</span></strong><span style='font-size:9.0pt;font-family:"Arial","sans-serif"'> The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.</span></p></td> <td width=1 class="Normal"></td> </tr> <tr> <td colspan=3 class="Normal"></td> </tr> </table> <table border=0 cellspacing=0 cellpadding=0 width="100%"> <tr> <td colspan=3 class="Normal"></td> </tr> <tr> <td width=1 class="Normal"></td> <td valign=top class="Normal"><p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>Northams</span></p> <u1:p></u1:p> <p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>21-23 New Street</span></p> <p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>Devon&nbsp; EX14 1HD</span></p> <p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>Tel: 01404 45994  Fax: 01404 46470 web: </span><span style='font-size:10.0pt'><a href="http://www.northams.com/"><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif";color:purple'>www.northams.com</span></a><u1:p></u1:p></span></p> <p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>Northams is registered for VAT under reference no 540590849.</span></p> <u1:p></u1:p> <p><span style='font-size:7.5pt;font-family:"Tahoma","sans-serif"'>The Principal of the firm is a member of the Institute of Chartered Accountants of England and Wales (ICAEW) and the Chartered Institute of Taxation.  These bodies have their headquarters in the <st1:country-region u2:st="on"><st1:place u2:st="on">UK</st1:country-region> and their rules of professional conduct can be obtained from their web sites.</span></p></td> <u1:p></u1:p> <td width=1 class="Normal"></td> </tr> <tr> <td colspan=3 class="Normal"></td> </tr> </table> </div> </body> </html>