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So......no surprises then, Darling!!


By the time he stood up to deliver your Pre Budget Report (PBR) we already knew what he was going to say. Or did we? Was this a deliberate ploy to deflect us from what’s in the small print? Well, maybe. The headline grabbers – lowering VAT, increasing tax for the higher paid – are just the tip of the iceberg. It’s all in the detail. Pages of it!

Once again we are faced with a barrage of changes to tax making it more and more difficult for many to keep up to date and ensure they pay the correct amount of tax, and not a penny more. And in today’s climate, identifying ways to reduce your tax bill is essential.

Tax planning is all about understanding business and personal taxes and indentifying ways to minimise them. We focus on understanding the complex tax laws in order to identify tax saving opportunities for you. In this edition of Pay Less Tax we highlight the main points from the PBR and what actions you can take to save tax.  

Behind the pre-budget report

As usual the Chancellor’s speech only gave part of the story. Shortly after his speech hundreds of pages of changes became available on the Revenue and Treasury websites. Throughout this edition we’ve concentrated on some of the main changes that you may need to be aware of.

These changes include the 13 month reduction in VAT from 17.5% to 15% from 1st December 2008. For those businesses that quote prices inclusive of VAT, this means that a fraction of 3/23 is to be used to calculate the VAT from 1st December, rather than 7/47. The government hope that businesses will pass on the VAT saving to customers.

This change does not affect reduced rate, zero rate, or exempt supplies or the general rules regarding VAT. However new rates apply from 1st December for those using flat rate VAT schemes. The main issue for many businesses will be coping with the change. HM Revenue & Customs have said that they will be lenient on errors arising in the changeover period, but this won’t last.


The press releases included a brief announcement that the income shifting proposals will be dropped for now. This move will be very welcomed by many small business owners and partnerships. New rules would have brought in further problems and potential tax liabilities, at a time when small businesses couldn’t cope. Providing companies are making profits, then many can continue to pay dividends to maximise the use of basic rate tax bands, where a shareholders’ income does not exceed higher rates (£40,835 before 6th April 2009, and £43,875 in the following year).

Tip: For companies we offer a remuneration review to identify the most tax efficient combination of options to extract funds from the company and save as much tax as possible. 

The rules for capital allowances and lease rentals on cars will change from April 2009 and be based upon the CO2 emissions of the car, rather than the price. Cars purchased with emissions over 160g/km will attract the lower 10% writing down allowance. Where cars with emissions over 160g/km are leased, 15% of the cost will be disallowed for tax purposes.

From April 2009 tax relief for companies will be extended to include the costs of bringing into use land derelict since April 1998. The relief is an extension of the current land remediation relief which gives companies a corporation tax deduction of 150% for qualifying expenditure on removing or mitigating the effect of contamination. There are a number of conditions to be met, and from April 2009 the relief will not cover some naturally occurring contamination.

The planned increase in corporation tax for small companies to 22% will now be delayed until April 2010.

From 2010 if you have a personal income over £100,000 then the personal allowance currently available will be reduced depending upon the level of your income. In April 2011 if your income is over £150,000 then you could be liable to tax at 45%. In the same year Trusts will also start to be taxed at 45% and National Insurance increases will be seen across the board.