George Osborne's first Budget did as was expected of it: cut
public spending and raise some taxes in an effort to combat the
deficit.
The Chancellor introduced an eye-catching 2.5% increase in VAT,
a rise in capital gains tax, both large and small company
corporation tax is to be reduced, and employers will be spared the
increase in national insurance contributions planned by the last
Government.
But what does the budget mean for you? We found out by asking
Justin Randall from leading charted accountants Jeffreys Henry
LLP.
A Sole Trader
EMERGENCY BUDGET 2010 - POST BUDGET
George Osborne's first Budget did as was expected
of it: cut public spending and raise some taxes in an effort to
combat the deficit.
The Chancellor introduced an eye-catching 2.5 per
cent increase in VAT, a rise in capital gains tax, both large and
small company corporation tax is to be reduced, and employers will
be spared the increase in national insurance contributions planned
by the last Government.
But what does the budget mean for you?
A Sole Trader
As a sole trader, you will benefit from an increase
in the personal income tax allowance. From next April, the tax-free
allowance will increase by £1,000 to £7,475 per annum. This means
you will not pay any income tax on the first £7,475 you earn.
If you are a sole trader and have a turnover in
excess of £37,400, consider incorporating your business to a
limited company to take advantage of the lower corporation tax
rates.
A Partnership (not including a limited liability
partnership)
Similar to sole traders, each partner will benefit
from an increase in personal income tax allowance to £7,475 per
annum.
For businesses operating as a partnership, the
profits can be allocated appropriately between the two partners to
absorb two sets of personal allowances and the basic income tax
rates. Nonetheless, a partnership should not be artificial and
needs to be clearly evidenced including paperwork, bank account and
the duties of each Partner.
A Limited Company
There is also some good news for limited
companies.
Starting from 1st April 2011, for headline rate of
Corporation Tax (for companies with a turnover of £300,000+) will
be reduced by 1% each year until it reaches 24%.
The Small Companies Corporation Tax (for companies
with a turnover of less than £300,000) rate will also be reduced
next year from 21% to 20%.
Moreover, if your company employs staff, the
threshold at which you start to pay Class 1 National Insurance will
be raised by £21 per week in April 2011.
The points raised above are only intended to
provide general information. Professional advice should always be
sought in specific situations before taking any action.
Jeffreys Henry LLP are a leading firm of chartered
accountants and business advisors in London. For more information
visit http://www.jeffreyshenry.com or call 0207 3092222.
As a sole trader, you will benefit from an increase in the
personal income tax allowance. From next April, the tax-free
allowance will increase by £1,000 to £7,475 per annum. This means
you will not pay any income tax on the first £7,475 you earn.
If you are a sole trader and make a profit in excess of £37,400,
consider incorporating your business to a limited company to take
advantage of the lower corporation tax rates.
A Partnership (not including a limited liability
partnership)
Similar to sole traders, each partner will benefit from an
increase in personal income tax allowance to £7,475 per annum.
For businesses operating as a partnership, the profits can be
allocated appropriately between the two partners to absorb two sets
of personal allowances and the basic income tax rates. Nonetheless,
a partnership should not be artificial and needs to be clearly
evidenced including paperwork, bank account and the duties of each
Partner.
A Limited Company
There is also some good news for limited companies.
Starting from 1st April 2011, for headline rate of Corporation
Tax (for companies with profits of £300,000+) will be reduced by 1%
each year until it reaches 24%.
The Small Companies Corporation Tax (for companies with profits
of less than £300,000) rate will also be reduced next year from 21%
to 20%.
Moreover, if your company employs staff, the threshold at which
you start to pay Class 1 National Insurance will be raised by £21
per week in April 2011.
The points raised above are only intended to provide
general information. Professional advice should always be sought in
specific situations before taking any action.
Jeffreys Henry LLP are a leading firm of chartered
accountants and business advisors in London. For more information
visit www.jeffreyshenry.com
or call 0207 3092222.