Newsletter

Budget 2007: Managed service companies

 Following the chancellors budget speech on 21^st March 2007, the draft legislation on (MSC) Managed Service Companies was published on 27^th March 2007. From 6^th April 2007 Freelancers/Contractor would no longer be able to receive dividend payments or claim any expenses through Managed services companies. Therefore 100% income would be subject to PAYE and NI deductions.

 Corporation Tax up to by 1% for small companies:

 The small companies’ rate of corporation Tax will be increased from 19% to 20% with effect from 1^st April 2007. The small companies’ rate will be increased further to 21% from 1 April 2008 and 22% from 1 April 2009. 

Capital Allowances:

 The 50% first year allowance for small business investing in plant and machinery is extended for one year. From 2008/09 the rate of writing down allowances for plant and machinery in the general pool will be reduced from 25% to 20% and the rate of writing down allowances for long life assets will be increased from 6% to 10%. 

Personal Tax:

The basic personal allowance is increased by £ 190 to £5225. From 2007 – 2008 the starting basic and higher rates of income Tax remain at 10%, 22% and 40% respectively. The starting rate band is increased by £80 to £2230 and the basic rate band by £ 1220 to £32370. But for tax year 2008-2009 which is announced in advance that the basic rate will reduce from 22% to 20%.

VAT

VAT registration threshold increased from £61000 to £64000 from 1st April 2007 and VAT deregistration threshold increased from £59000 to £62000 from 1 April 2007. Rate of VAT unchanged £17.50% but certain housing alternations for elderly people will be cut from 17.50% to 5.00%, might it will effect on 1 July 2007.