Tax Guides

Income Tax

Tax Rates	Note	2006/07	2006/06
Starting rate band £0 to		£2,150	£2,090
Rate of tax on starting band		10%	10%
Basic rate band – the next rate to		£31,150	£30,310
Rate of tax – non savings rate		22%	22%
Rate of tax – savings rate		20%	20%
Rate of tax – UK dividend rate		10%	10%
Higher rate band - the next rate		£33,300	£32,400
Rate of tax – higher rate		40%	40%
Rate of tax – UK dividend rate		32.5%	32.5%
Allowances that reduce taxable income
Personal allowance under 65	a	£5,035	£4,895
65 to 74	a,c	£7,280	£7,090
75 years and older	a,c	£7,420	£7,220
Blind persons allowance		£1,660	£1,610
Allowances that reduce tax
Married couples allowance
Tax reduction 72 to 74	a,b,c	£606.50	£590.50
75 Years and older	a,b,c	£613.50	£597.50
The age related allowances are withdrawn progressively if income exceeds		£20,100	£19,500
Minimum personal allowance		£5,035	£4,895
Minimum reduction in married couples allowance tax reduction		£235	£228
Golden handshake – maximum		£30,000	£30,000
Rent a room – exemption of gross annual rent up to and including		£4,250	£4,250

Note reference
a) The ages stated are those at the end of the tax year, ie 5th April. Ages for the married couples allowance relate to the elder spouse or civil partner.

b) Married couples allowance is only available to those couples where at least one spouse or civil partner was born prior to 6th April 1935.

c) The higher rates of personal allowances are reduced by £1 for each £2 of excess income over the limits, until the basic personal allowance is reached. Similar limits apply to the married couples allowance in that the loss of tax reduction is 10p for each £2 of excess until the minimum amount is reached.

Corporation tax rates/bands - Back to top

Taxable profits financial year to	31st March 2007	31st March 2006
First £ 10,000	19%	0%
Next £ 40,000	19%	23.75%
Next £ 250,000	19%	19%
Next £ 1,200,000	32.75%	32.75%
Excess of £ 1,500,000	30%	30%
Non corporate distribution rate	n/a	19%

Value Added Tax - Back to top

Period from	1st April 2006	1st April 2005
Standard rate	17.5%	17.5%
VAT fraction	7/47	7/47
Taxable turnover limits
Registration – last 12 months or next 30 days	£61,000	£60,000
Deregistration – next 12 months under	£59,000	£58,000
Cash accounting scheme – up to	£660,000	£660,000
Optional flat rate scheme – up to	£150,000	£150,000
Annual accounting scheme – up to	£1,350,000	£660,000

Petrol	Scale Charge	VAT due per car
up to 1400cc	£273	£40.66
1401cc – 2000cc	£346	£51.53
2001cc and over	£508	£75.66
Diesel
up to 2000cc	£260	£38.72
2001cc and over	£331	£49.30

Vehicle Benefits - Back to top

These are chargeable on employees earning, including benefits, £ 8,500 or more and Directors.

Please also see Calculators – Car benefit calculator/Van benefit calculator.

Car Benefit

The income tax that is levied on your company car is governed by the following factors:-

1. The list price of the car, on the day before it was first registered, plus certain accessories,
2. The rate at which CO2, carbon dioxide, is emitted from the car ,this can be found on the car’s V5registration document.
3. The type of fuel the car runs on.

The taxable percentages for 2006/2007 can be found using the following table.

CO2 in g/km	Taxable % Petrol	Diesel
Less than 145	15%	18%
145 to 149	16%	19%
150 to 154	17%	20%
155 to 159	18%	21%
160 to 164	19%	22%
165 to 169	20%	23%
170 to 174	21%	24%
175 to 179	22%	25%
180 to 184	23%	26%
185 to 189	24%	27%
190 to 194	25%	28%
195 to 199	26%	29%
200 to 204	27%	30%
205 to 209	28%	31%
210 to 214	29%	32%
215 to 219	30%	33%
220 to 224	31%	34%
225 to 229	32%	35%
230 to 234	33%	35%
235 to 239	34%	35%
240 and over	35%	35%

For cars registered before 1st January 1998 reliable emissions date is not widely available, and the following taxable percentages apply, regardless of whether the car is petrol or diesel.

Engine capacity	Taxable %
Up to 1400cc	15%
1401cc – 2000cc	22%
2001cc and over	32%

Car Fuel Benefits

If an employee pays in full the cost of all fuel for private journeys, including home to work, there is no car fuel benefit. In all other cases the full tax charge will fall due.

The taxable car fuel benefit, 2006/2007, is calculated by multiplying £14,400 by the same percentage as applies, or would apply, for the car benefit

Van Benefit

	Van under 4years old	Van under 4years old
Benefit per vehicle, Including fuel for private use	£500	£350

From 6th April 2007 the taxable benefit for the unrestricted use of company vans will be £ 3,000, regardless of the age of the van, plus an additional £500 of taxable benefit will apply if, fuel is provided by the employer for private travel.

Capital Allowances - Back to top

The main Capital Allowances available to businesses and the rates of the allowances are as follows :-

Motor cars

On a reducing balance

25%

Maximum claim of £3,000 per car per annum

Plant & Machinery - Small firms

Allowance for first year – to 31st March 2007 for companies	50%
Writing down allowance – reducing balance	25%

Plant & machinery – medium sized firms

Allowance for first year	40%
Writing down allowance – reducing balance	25%

Plant & machinery – large firms

Writing down allowance – reducing balance

25%

Long life assets

Allowance for first year	6%
Writing down allowance – reducing balance	6%

Energy saving technology

All firms

100%

Cars emitting not more than 120g/km CO2

Registered between 17th April 2002 and 31st March 2008

100%

Buildings

Industrial buildings/qualifying hotels	4% of building cost pa
Commercial/industrial buildings – in enterprise zone	100% of building cost pa
Agricultural buildings	4% of building cost pa

Definitions

A small firm is defined as a business that satisfies any 2 of the following :-

• Turnover less than £ 5,600,000
• Assets less than £ 2,800,000
• No more than 50 employees

A medium firm is defined as a business that satisfies any 2 of the following :-

• Turnover less than £ 22,800,000,
• Assets less than £ 11,400,000,
• No more than 250 employees

Mileage Allowances - Back to top
The approved tax and national insurance free mileage allowances for employees using their own transport for business are :-

Flat Rate	First 10,000 miles	Thereafter
Car	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

It should be noted that Income Tax and National insurance fall due if these allowance rates are exceeded, and that employees being paid at a lower rate can claim tax relief on any shortfall.

Also, rates of up to 5p per mile, per passenger are tax and national insurance free when paid for the carriage of fellow employees on the same trip.

National Insurance Contributions - Back to top

Class 1 (not contracted out)	Employer	Employee
Lower earnings limit		£84
Payable on weekly earnings
£97.01 to £645	12.8%	11%
Over £645	12.8%	1%
Men 65 and over and women 60 and over	as above
Class 1A (on relevant benefits)	12.8%
Class 2 (self employed)	£2.10 per week
Limit of net earnings for exception	£4,465 pa
Class 3 (voluntary)	£7.55 per week
Class 4 (self employed)
£5,035 to £33,540	8%
Excess of £33,540	1%

Important Dates/Deadlines - Back to top

19th May 2006	P14, P35, P38, P38A and CIS36 should be filed with HM Revenue & Customs.
31st May 2006	P60’s should be issued to employees.
6th July 2006	P9D, P11D and P11C(b) should be filed with HM Revenue & Customs and copies given to employees.
19th July 2006	Class 1A National Insurance on Relevant Benefits due.
31st July 2006	Second payment on account due of Income Tax and Class 4 National Insurance for 2006/2007.
31st January 2007	Balancing payment due in respect of Income Tax liability for 2006/2007.
	First payment on account due in respect of Income Tax and Class 4 National Insurance for 2007/2008.
	Payment due date for Capital Gains made in 2006/2007.

In addition to the above deadlines there are additional key dates that should be considered.

• Corporation Tax is due 9 months and 1 day after the relevant accounting period end.
• Corporation Tax Returns need to be filed with HM Revenue and Customs within 12 month of the relevant accounting period.
• Company accounts need to be filed with the Registrar of Companies within 10 months of the relevant accounting period.