The budget – Willis Cooper style

One firm of accountants that Saylavy work closely with are Willis Cooper Chartered Accountants, and the easy to understand budget review is worth a read, so thought I would share it with you…

“Yes, it’s that time of year again; the days are getting longer, spring is in the air, Arsenal are wobbling and it’s budget time.  I ask you, can life get any better?    So let’s celebrate with our annual budget busting top ten tax titbits which, as usual, are designed to help guide you, dear reader, through all the flannel and filling to get to the heart of what you really need to know.  And this of course comes with our usual guarantee, that it’ll all fit onto a side of A4.

Here goes…

  1. First up; mileage.  Did you know that mileage allowance has remained at 40p per mile (on the first 10k business miles) since 2002?  At that time fuel was 70p per litre.  Well finally, with fuel now approaching £1.40 per litre, the mileage rate is being raised to 45p per mile from the beginning of next month.  Hallelujah to that, we say; but what about the old 25p rate for mileage beyond 10000 miles?  Surely it makes sense for that to increase as well?  As if.
  2. So far so good, what’s next?  We are pleased to announce increases in the amount you can earn before you pay tax.  What does this mean for the company directors amongst you?  If you pay yourself the minimum to qualify for NI purposes you should increase your salary by £126 from £476 to £602 per month with effect from April 2011.
  3. What about your dividends; any news there?  I’m afraid that what Georgie boy giveth with one hand he taketh back with the other; the maximum you can draw before you start to pay tax on dividends is (subject to the various usual caveats) down £218 from the current £2862 to £2644 per month after 5th April.
  4. Oh, and the increases in National Insurance brought in last year remain.  So if you employ people then from April employer’s NI increases by 1% to 13.8%; all that election stuff about this being a ‘tax on jobs’ is now a distant memory.   And to follow from 2014 are built in workplace based pension payments that employers will have to pay on behalf of employees…
  5. The big news in the budget is of course the reduction in the rate of corporation tax by 2%.  You might however have missed the small print – this decrease only applies to those companies whose annual profits are greater that £1,500,000.  The small company rate is being lowered from 21% to 20% from April 2011; but that had already been announced last time.
  6. After the VAT hike to 20% comes some good news for those of you trading below the VAT threshold.  From April this increases to £73000 in any 12 month period.
  7. An interesting announcement for those of you who design and develop things is a very significant increase in the credit available to companies for qualifying R&D expenditure. I won’t go into the details of the considerable tax benefits here, but the £10,000 minimum expenditure condition has been abolished so more of you will qualify.  It’s actually much easier to qualify than you might think…give us a call if you want to discuss further.
  8.  The next point of interest concerns the creation of new Enterprise Zones in Derby and Derbyshire.  Any businesses within an enterprise zone are effectively exempt from business rates for five years which sounds great.  However, I don’t think we know exactly where they’ll be situated so let’s wait and see, but I’m putting my money on Erewash and Ashfield.
  9. There was no extension to the national insurance holiday which relieves new businesses established after 22nd June 2010 from paying National Insurance on employees during the first year of trade.  It was originally estimated that 400,000 new businesses would benefit, but according to Ed Miliband’s reply to the budget speech, only 1,500 businesses have so far taken advantage, which we do find a bit surprising.  Again, give us a call if you think you might qualify.
  10. And finally it’s number ten.  What, so soon?  Yes, I’m afraid so and this ones for you IR35 guys and gals.  After all that hot air about a review of small business taxation by the Office of Tax Simplification, with a specific remit to review IR35, all you’ve got is a dedicated HMRC Helpline staffed by, ahem, “specialists”.  Would you trust an HMRC helpline?  After all the years of those Tory MPs banging on about the iniquity of IR35, what do they do when they come to power? In the wise words of Edwin Starr, “Absolutely Nothing”.”

Thank you Willis Cooper, the forward thinking accountants who never fail to add a bit of humour to tax matters and put it into English!