Difficult economic conditions and a raft of earlier announcements meant that Alistair Darling’s debut Budget contained few surprises. In the 2007 Budget, Gordon Brown had already trailed the main changes to income tax and corporation tax. Similarly, Mr Darling’s Pre-Budget Report of last October heralded revision of inheritance tax and, more controversially, reform of capital gains tax and the treatment of non-domiciliaries.
The largest single tax-raising measure that was newly announced on Budget Day was the increase in alcoholic duties of 6% above inflation. There was the usual range of anti-avoidance legislation, attacking everything from stamp duty land tax schemes to those involving corporate intangible assets. However, the Chancellor chose to delay the rules targeting ‘income splitting’ until next year’s Finance Bill, even though draft legislation has already been issued.
This was never going to be an exciting Budget, but that does not make it uneventful: HMRC issued no fewer than 107 Budget Notes detailing changes. Simplification of the tax system, which Mr Darling has said he wants to see, remains a distant goal.
Budget highlights
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The basic rate of tax will fall to 20%.
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The 10% starting rate band will apply only to savings income. The net effect will be to abolish the 10% band for all but those with very low levels of earnings and/or pensions.
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The new capital gains tax regime, including an 18% flat rate and the entrepreneurs’ relief, will start on 6 April 2008.
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The controversial rules for non-domiciliaries will also come into effect, broadly as previously announced, on 6 April 2008.
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The main rate of corporation tax will fall to 28% from 1 April 2008, and the structure of capital allowances will be revised.
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The maximum investment in an enterprise investment scheme that can qualify for income tax relief will rise to £500,000 from 6 April 2008.
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The tax treatment of overseas dividends, offshore funds and some authorised funds will be revised.
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Charities will be given a 2% transitional relief for gift aid donations to compensate for the reduction in the basic rate of tax.
© 12 March 2008. 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. It is recommended you seek competent professional advice before taking any action on the basis of the contents of this publication.
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