Budget 2004

The Chancellors budget covered a wide variety of areas and a number of these have a direct impact on our clients. A few examples are detailed below:

~ Clients wanting to transfer property into a Trust can no longer hold over any gains into the Trust if they are a beneficiary. Capital Gains Tax must be paid before the transfer takes place.

~ ISAs and PEPs can no longer claim the 10% tax credit on dividends. However income tax deducted from fixed interest income can still be reclaimed

~ A chargeable gain on the sale of a life policy or investment bond will lead to a tax charge of 20% (an increase from 18%) for higher rate tax payers

~ Van drivers using the van for private use face a taxable benefit of £3,000 plus £500 if fuel is provided

~ Fuel benefits for company cars increases to an emission based calculation multiplied by £14,400 which for a car with emissions of 35% leads to a tax charge of £2,016 for a higher rate tax payer (equal to 20,000 private miles.

~ Companies paying dividends to individuals will pay corporation tax of at least 19 % on those distributions

~ Investment in information technology will no longer qualify for 100% relief for corporation tax.

~ Capital Gains Tax will no longer be deferred if an investment is made into a Venture capital trust

~ All Trusts receive a £500 Basic rate Tax allowance reducing the need for tax returns for some trusts.

Budget Summary

This year there were very few major changes in the Budget as expected. The following is a brief summary of the changes and current rate of tax and allowances:

Income Tax

Personal Allowance - £4,745
Personal Allowance 65 - 74 - £6,830
Personal Allowance 75 + - £6,950
Married couples allowance - £5,725
(under 75 and born before 6/4/35)
Married couples allowance - £5,795
(over 75)
Blind persons allowance - £1,560
Starting rate Band (10%) - 0 - £2,020
Basic Rate Band (22%) - £2,021 - £31,400
Higher Rate Band (40%) - £31,401 +
Trust Rate - 40%
Income Limit for age related allowance - £18,900

National Insurance

Lower Earnings Limit - £79 per week
Upper Earnings Limit - £610 per week
Primary threshold - £91 per week
Employers Class 1 rate - 11% from £91.01 to £610 & 1% over £610
Employers rate - 12.8% from £91.01
Class 2 rate - £2.05 per week
Class 2 Earnings Exemption - £4,215
Class 3 rate - £7.15 per week
Class 4 Earnings Limits - £4,745 - £31,720
Class 4 rate - 8% from £4,745 to £31,720 & 1% over £31,720

Capital Gains Tax

Individual Exemption £8,200
Trust Exemption £4,100
Individuals Rates 10%, 20 or 40%
Trust Rate 40%

Stamp Duty

Residential Property Value & Rate
0 - £60,000 - 0%
60 ,000 - £250,000 - 1%
£250 ,000 - £500,000 - 3%
£500,000 + - 4%

Inheritance Tax

Estate exemption - £263,000
Rate above exemption - 40%

Minimum Wage rate (effective from October 2004)
16 - 17 - £3.00 per hour
18 - 21 - £4.10 per hour
22 + - £4.85 per hour

The Chancellor also confirmed that the new rules aimed at simplifying Pension Schemes will be announced shortly. It is the Governments intention that these are introduced in April 2005