Budget 2008 (TAKE TWO): Tax tables 2008/09

Updated tables following the chancellor of the exchequor’s announcement on 13 May 2008 to increase the personal allowance (age under 65) by an extra £600.

National Insurance:

Note that the lower limit for employees and the self-employed for National Insurance are no longer aligned with personal allowances.

For example: Employee on £18,000 p.a.

Gross pay for tax 18,000 Gross for National insurance 18,000
Personal allowance 6,035 Primary threshold £105 x 52 weeks 5,460
Net for tax 11,965 Net earnings for NI 12,540
Tax @ 20% 2,393.00 NI @ 11% 1,379.40
Total tax and NI = £3,772.40

For example: Self-employed with profits of £18,000 p.a

Profit for tax 18,000 Profit for NI 18,000
Personal allowance 6,035 Lower Class 4 NI threshold 5,435
Taxable 11,965 NI’able 12,565
Tax @ 20% 2,393 NI @ 8% 1,005.20
Class 2 NI £2.30 119.60
Total tax and NI = £3,517.80

2008 Budget tables:

Income tax, capital gains tax, and inheritance tax

£ per year (unless stated) 2007-08 Change 2008-09
Income tax personal and age-related allowances
Personal allowance (age under 65) £5,225 +£810 £6,035
Personal allowance (age 65-74) £7,550 +£1,480 £9,030
Personal allowance (age 75 and over) £7,690 +£1,490 £9,180
Married couple’s allowance* (aged less than 75 and born before 6th April 1935) £6,285 +£250 £6,535
Married couple’s allowance* (age 75 and over) £6,365 +£260 £6,625
Married couple’s allowance* – minimum amount £2,440 +£100 £2,540
Income limit for age-related allowances £20,900 +£900 £21,800
Blind person’s allowance £1,730 +£70 £1,800
Capital gains tax annual exempt amount
Individuals etc. £9,200 +£400 £9,600
Most trustees £4,600 +£200 £4,800
Individual inheritance tax allowance £300,000 +£12,000 £312,000
Pension schemes allowances
Annual Allowance £225,000 +£10,000 £235,000
Lifetime Allowance £1,600,000 +£50,000 £1,650,000

* Married couple’s allowance is given at the rate of 10%.

Income tax: Taxable bands

2007-08 £ per year 2008-09 £ per year
Starting rate: 10% £0-£2,230
Basic rate: 22% £2,231-£34,600 Basic rate: 20%* £0-£34,800
Higher rate: 40% Over £34,600 Higher rate: 40%* Over £34,800

* There will be a new 10% starting rate for savings income only, with a limit of £2320. If an individual’s taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate.

Corporation tax on profits

£ per year (unless stated) 2007-08 2008-09
£0-£300,000 20% 21%
£300,001 – £1,500,000 Marginal relief Marginal relief
£1,500,001 or more 30% 28%

National insurance contributions

£ per week (unless stated) 2007-08 Change 2008-09
Lower earnings limit, primary Class 1 £87 +£3 £90
Upper earnings limit, primary Class 1 £670 +£100 £770
Primary threshold £100 +£5 £105
Secondary threshold £100 +£5 £105
Employees’ primary Class 1 rate between primary threshold and upper earnings limit 11% 11%
Employees’ primary Class 1 rate above upper earnings limit 1% 1%
Employees’ contracted-out rebate – salary-related schemes 1.6% 1.6%
Employees’ contracted-out rebate – money-purchase schemes 1.6% 1.6%
Married women’s reduced rate between primary threshold and upper earnings limit 4.85% 4.85%
Married women’s rate above upper earnings limit 1% 1%
Employers’ secondary Class 1 rate above secondary threshold 12.8% 12.8%
Employers’ contracted-out rebate, salary-related schemes 3.7% 3.7%
Employers’ contracted-out rebate, money-purchase schemes 1.4% 1.4%
Class 2 rate £2.20 +£0.10 £2.30
Class 2 small earnings exception (per year) £4,635 +£190 £4,825
• Special Class 2 rate for share fishermen £2.85 +0.10 £2.95
Special Class 2 rate for volunteer development workers £4.35 +£0.15 £4.50
Class 3 rate (per week) £7.80 £0.30 £8.10
Class 4 lower profits limit (per year) +£5,225 +£210 £5,435
Class 4 upper profits limit (per year) £34,840 +£5,200 £40,040
Class 4 rate between lower profits limit and upper profits limit 8% 8%
Class 4 rate above upper profits limit 1% 1%

Working and child tax credits rates

£ per year (unless stated) 2007-08 Change 2008-09
Working Tax Credit
Basic element £1,730 +£70 £1,800
Couple and lone parent element £1,700 +£70 £1,770
30 hour element £705 +£30 £735
Disabled worker element £2,310 +£95 £2,405
Severe disability element £980 +£40 £1,020
50+ Return to work payment (16-29 hours) £1,185 +£50 £1,235
50+ Return to work payment (30+ hours) £1,770 +£70 £1,840
Childcare element of the Working Tax Credit
Maximum eligible cost for one child £175 per week £175 per week
Maximum eligible cost for two or more children £300 per week £300 per week
Percentage of eligible costs covered 80% 80%
Child Tax Credit
Family element £545 £545
Family element, baby addition £545 £545
Child element £1,845 +£240 £2,085
Disabled child element £2,440 +£100 £2,540
Severely disabled child element £980 +£40 £1,020
Income thresholds and withdrawal rates
First income threshold £5,220 +£1,200 £6,420
First withdrawal rate 37% +2% 39%
Second income threshold £50,000 £50,000
Second withdrawal rate 6.67% 6.67%
First threshold for those entitled to Child Tax Credit only £14,495 +£1,080 £15,575
Income disregard £25,000 £25,000

Child benefit and guardian’s allowance rates from 6 April 2008

£ per week 2007-08 Change 2008-09
Eldest/Only Child £18.10 +£0.70 £18.80
Other Children £12.10 +£0.45 £12.55
Guardian’s Allowance £12.95 +£0.50 £13.45

Stamp taxes and duties

Transfers of land and buildings (consideration paid)

Rate Residential in disadvantaged areas Residential outside disadvantaged areas Non-residential
Total value of consideration
Zero £0 – £150,000 £0 – £125,000 £0 – £150,000
1% Over £150,000 – £250,000 Over £125,000 – £250,000 Over £150,000 – £250,000
3% Over £250,000 – £500,000 Over £250,000 – £500,000 Over £250,000 – £500,000
4% Over £500,000 Over £500,000 Over £500,000

New leases (lease duty)Duty on the premium is the same as for transfers of land (except that special rules apply for non-residential land and property premium where rent exceeds £1,000 annually. The rules no longer apply to residential property from 12 March 2008). Duty on the rent is charged on any part of the net present value (NPV) which exceeds the threshold.

Rate Net Present Value of rent
Residential in disadvantaged areas Residential outside disadvantaged areas Non-residential
Slice of NPV
Zero £0 – £150,000 £0 – £125,000 £0 – £150,000
1% Over £150,000 Over £125,000 Over £150,000

Transfers of shares and stocksThe rate of stamp duty/stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2008-09.

Business website tips

Successful selling online requires a website that is visually attractive as well as easy to use. Here are some tips for developing a website that looks good and is easy to read by visitors.

Make it readable

Visual appeal is nice, but readability must be a top design priority. In order for your content to communicate effectively you need to consider how colours and fonts work on a webpage.

Make the pages easy to view

Visitors do not like to scroll from left to right to see the entirety of a webpage so build it to fit the standard monitor size of 640 by 480 pixels. Larger screens are growing in popularity but unless you are certain that your target audience is likely to be using them, stick with a smaller page size. Also check how your pages display in different web browsers – displaying properly in the popular Mozilla Firefox and Microsoft Internet Explorer browsers is a minimum requirement. Long pages that require scrolling down … and down … and down are also poor practice. It’s better to create a number of pages than have this toilet roll effect.

Provide alternate text for images

If you use graphics for navigation (such as buttons) or rely on images to display products, provide an alternative text (ALT text) description in the HTML code. ALT text provides a text equivalent of the image. There are a number of reasons for including a text description:

But be warned – there’s a real art to constructing and using ALT text. The text need not be a literal description of what the image represents. There’s not much point in using the ALT text ‘microwave oven’ if the image is meant to display the product’s most attractive selling features. The ALT text will be better used describing those features.

Keep download time to a minimum

Visitors resent waiting for slow downloading pages. Decrease loading time by paying attention to the size of the webpage. Website developers suggest a maximum of 30K for a webpage overall. Thus, if you have three 6K images on the page, you should not add more than 12K of HTML and text. It’s preferable to increase the number of pages rather than overload a single page.

Davies McLennon are Stockport Accountants

Ten reasons why you should look at using incentives!

Incentives play an integral role in motivating consumers to buy certain products over others. Here are some ideas for incentivating existing and potential customers to use your product.

  1. Increase product trialing. A giveaway can be used to increase product trialing and brand recognition. For example, at the end of several summer concerts, concertgoers were given sample size bags of coffee in assorted flavours to take home with them. This put the coffee in the hands of a great number of people who might never have tried it otherwise.
  2. Promote website visits. An incentive offer can be used to drive traffic to your website. When the online company Inoutdoors.com wanted to grab the attention of nature lovers it sponsored an online drawing competition. The grand prize of an all-expenses-paid vacation with well known sports celebrities proved to be an alluring incentive.
  3. Increase brand awareness. No matter what business you’re in, keeping your name in front of customers is a top priority. Giveaways such as mouse mats, T-shirts and umbrellas emblazoned with the company logo are popular ways of getting the brand ‘out there’.
  4. Level seasonal variations in sales. The dips and plateaus of the business cycle affect many industries. A well planned incentive campaign can lure customers to buy during the off-season. Having an outdoor barbecue is great in the summer. But how many families enjoy cooking out in the colder winter months? To entice patrons to buy grills during the winter months, a major retail chain offered gas grill buyers a valuable steak package and sponsored on-site barbecues where they gave away steak and burgers to lucky customers. That promotion yielded a 35% increase in sales.
  5. Boost slow moving products. Being associated with well known brands or activities gives less popular items appeal to a broader audience. Offering a free trial, discount coupon or prize of a slower moving product/service to purchasers of a recognised line can encourage their popularity.
  6. Build continuity of purchase. An incentive campaign can encourage repeat sales of a product. The beverage industry is known for motivating customers to make their beverage purchases in bulk by including sequential contests within large cases. In order to win, you must collect all the game pieces – meaning you have to continue purchasing the product.
  7. Increase volume sales. ‘Free with purchase’ premiums aim to increase volume sales while also increasing consumers’ appreciation for the featured product. Consumers are required to buy a featured product in order to receive the premium. Beauty salons often offer free styling or nail service with the purchase of a premium haircut.
  8. Learn more about customers and identify prospects. Premiums have proven to be highly effective in both direct mail campaigns and direct selling programmes as a way of increasing customer knowledge and identifying prospects. By asking for some demographic information on their entry ballot for a competition you can build a more accurate profile of customers. Prospects can be identified by encouraging participants to submit entry forms for friends and family members as well as themselves.
  9. Reach adults through their children. Kids possess immense purchasing power and can directly influence their parents to buy products. When Kool-Aid wanted to introduce its brand to a new generation, it sponsored a ‘More Smiles Per Gallon’ tour. In every targeted market the Kool-Aid Man stopped in popular children’s play areas such as zoos, museums and amusement parks. Free photos with the Kool-Aid Man, an opportunity to play a soccer game, and, of course, free samples with coupons attached, attracted potential consumers and helped raise awareness of Kool-Aid.
  10. Offset price concerns. One way for a company to take consumer attention off the actual price of an item is to offer a valued premium. Mobile phone companies are famous for creating promotions for new subscribers that include a valuable phone when they sign up for a contract package.

When you offer your customers or prospects valuable incentives as rewards for purchases made or enticements for engaging with the business in some way, they are by nature appreciative, so incentive marketing is a great way of cementing customer loyalty and gives potential customers more of a reason to pay attention to your product.

How to recruit the best!

recruitment advertGetting good people into your organisation is crucial, people are the business. If you want to attract the sort of job applicant who will require the minimum of training to get up to speed, who will be happy with their job, and who will fit into your workplace, then don’t underestimate the importance of knowing how to write a job advertisement. If it is flawed, the applicants will be unsuitable, you’ll waste time and money on the whole exercise and maybe end up with someone you really consider second best.

To get the right message across about what you require, pay attention to developing four aspects of your ad; responsibilities, requirements, the benefits you are offering and what type of person would fit in.

Assess and prioritise the job’s responsibilities

The job description is basically an outline of how the job fits in to the organisation. It should point out in broad terms the job’s goals, responsibilities and duties. This may sound obvious but often recruiters just draw up a laundry list of duties without carefully considering and prioritising them. Include only the core responsibilities. Jobs change over time and job descriptions go out of date. Preparing a recruitment advertisement provides an opportunity to reconsider the job and ascertain exactly what it involves and what sort of skills it requires. The better you understand the role, the clearer your ad will be.

Specify the requirements exactly

Spell out your requirements clearly and precisely. How many recruitment ads include the requirement ‘strong communication skills’? Running a sales presentation, talking to customers and writing up a proposal are all communication skills but there’s a lot of difference between what’s involved in each. Ask yourself “To what purpose will this communication skill be used?” and write up the ad accordingly. Instead of ‘good communication skills’ it could be ‘ability to develop and present an effective sales presentation’; instead of ‘computer literate’ specify ‘proficient with Microsoft Word, Excel and QuickBooks’ if that is what the job entails using.

The same precision should be used in listing any required certification and personal capabilities for performing the job such as the ability to lift a certain amount of weight, drive certain types of vehicle on the job or use particular types of machinery. It can also be used to specify the type of experience required, such as ‘experience handling accounts worth over £2 million a year’.

Include the benefits, not just the salary

Don’t mention only the monetary reward. While that may be the bottom line it is often just one of the things a candidate is interested in. Job development opportunities such as training or travel, challenging assignments and career advancement potential can attract great candidates interested not just in getting a job, but in making a wise career move. For others a retirement scheme or health benefits package may be important. Applicants for a position in a particular organisation should be interested in what that industry does. So, for instance, offers of discount travel for team members would attract candidates for a travel agency job.

Attract best-fit candidates, not just the best qualified

The message about ‘what type of person would enjoy working here’ will come across in what you say in the ad. The specifications might include ‘feeling comfortable in a multicultural, cooperative environment’. The conditions could mention that dress is generally informal. The benefits might include an annual office ski vacation. All these say something about the organisation and provide the would-be applicant with an idea of how comfortable they’d feel in the workplace.

Your recruitment ad is more than just a job description – it’s a marketing exercise that has to attract a pool of suitably qualified applicants who will fit into your organisation. A poorly written recruitment ad could mean being swamped with unsuitable applicants or it could result in too few responses – both of which waste your time and money.

Three-quarters of SME’s would not have Alistair Darling on their payroll!

A poll carried out among owner-managed businesses across the country by Clifton Asset Management has found one third of UK companies believe the media is in danger of “talking the economy into recession.”

The survey, also found that almost three-quarters of SMEs would not trust Alistair Darling with their own company finances by appointing him as their FD.

The majority (65 per cent) said the Chancellor showed no signs of being “business friendly”, and not a single one believed that Gordon Brown’s government acknowledges the value to the UK economy of the small business sector.
The research also found that the majority of owner-managed businesses (56 per cent) feel totally neglected by their bank since the onset of the credit crunch.

Ellis Organ, financial director of Clifton Asset Management, said: “While there can be no denying the gravity of the situation facing the UK economy, many businesses – 33 per cent – clearly feel that media commentators seem determined to talk us into a full-blown recession, with only 15 per cent of respondents to our survey agreeing with the view that a recession is imminent.

“Only 11 per cent told us that they are seeing the symptoms of a major downturn, with approaching half of those who took part in our survey highlighting strong order books and no noticeable increase in problems over issues such as late payment.”

“Only one in five owner-managers in our survey said they would consider employing Alistair Darling as their FD – but not without references and a thorough interview process, leaving just 6 per cent who have real confidence in his ability,” said Ellis Organ.

Credit Crunch
The survey found that reaction to the credit crunch by banks is causing problems for some businesses. Of those surveyed, 14 per cent said their existing facility had been reduced, or that higher interest rates and collateral security had been imposed. Although, 28 per cent said their bank had been happy to extend facilities with no change in interest or security arrangements.

Ellis Organ stated: “While 15 per cent of our survey sample said they had seen a noticeable upturn in the amount of contact they received from their bank, eager to check on their exposure and solidity, some 56 per cent felt that they may as well not even exist as their bank is concerned.

There is a widespread feeling that Gordon Brown’s government does not appreciate the contribution that SME’s make to the economy.

Only 4 per cent of firms said decisions such as the recent U-turn on capital gains tax were proof that their contribution is recognised by government, while 9 per cent say there is some element of appreciation, notwithstanding a reduction in tax benefits for owner-managed businesses.

Ellis Organ concluded by stating: “This leaves 85 per cent in our survey effectively feeling snubbed by this government.

“For most of these, there is no question that the ever-burgeoning mountain of red tape is their biggest headache, and that Gordon Brown’s promise to “light a red tape bonfire” remains an empty one.

“The people who responded to our survey, and countless others like them across the country, form the backbone of our economy. Our survey highlights once again that these individuals continue to feel ignored by… a government which only appears to pay attention to the concerns of big business.”

The survey was commissioned by Clifton Asset Management, the country’s leading alternative to banks for owner-managed business finance and strategic planning.

What do self employed people get for their NIC contributions?

We are often asked to comment on the state benefits you will or wont be able to claim if you are self-employed and pay the basic Class 2, and the earnings related Class 4 contributions.

Class 2 contributions will qualify you for most of the benefits that an employed person can claim. (Employed persons pay Class 1 contributions.) The two main exceptions are earnings related state pension and contribution-based Jobseekers allowance.

If you are self-employed and are unable to work due to illness you should be able to claim incapacity benefit. However you may disqualify yourself if you make occasional visits to your workplace. You may also have difficulties if you work from home, proving that you do no work.

Class 4 contributions do not count towards any benefits (in other words, its just tax).

Retirement pension
Two useful points. You may be able to combine your contribution record with your husband’s, wife’s or civil partner’s contribution record if:

  • you are widowed
  • You are the surviving partner of a civil partner who has died
  • you are divorced
  • your civil partnership has been dissolved

The number of years contributions required to qualify you to a basic state retirement pension is 30 years if you are due to reach retirement age on or after 6 April 2010.

Check if NI numbers and VAT numbers are valid

A guide to help you determine if NI numbers and VAT numbers are valid.

Certain PAYE returns (P35, P11D) will be rejected by HMR&C if a National Insurance number (NINO) is incorrectly displayed. Valid numbers always follow the same format, two letters, followed by six numbers, followed by a single letter. i.e. AB123456D.

The following information sets out the valid alpha prefixes and suffixes. If you are at all uncertain that you have been given a correct NINO, you should check with your local tax office.

Valid National Insurance Number Prefixes:


The characters D, F, I, Q, U and V are not used as either the first or second letter of a National Insurance Number prefix.

Valid National Insurance Number Suffixes:

The final alpha of the NINO should be A, B, C, or D.
VAT Registration numbers

There are occasions when the validity of a VAT registration number is critical. Particularly:

  • When you make a supply to a registered European Union trader, or
  • When you receive an invoice from a supplier on which VAT has been added.

Supply to EU trader

If it appears that the VAT number you have been given is incorrect, you should charge VAT rather than exempt the supply.

Purchase of goods/services from registered UK trader.

One of the aspects that qualifies a supply for a reclaim of input tax charged, is if the invoice shows a valid VAT registration number. Although HMR&C have discretion to allow a deduction even if the number is wrong, the discretion only applies in certain circumstances.

How to check a VAT registration number.

There are two ways to check the validity of a VAT number:

1. Call HMR&C 0845-010-9000.
2. A more hi-tech solution, visit the Europa web site at http://ec.europa.eu/taxation_customs/vies/vieshome.do, select the correct member state and enter the VAT number you have been given. This will only confirm if the number is a valid registration number. There is no way to use this service to confirm the number belongs to your customer/supplier

Davies McLennon are Stockport Accountants

Payroll deadlines

Filing deadlines
We are approaching a number of important filing deadlines that will apply to businesses who operate a payroll. We have summarised the main key dates below. If you have any problems meeting these dates we may be able to help.

19 May 2008 – Last date for your 2007-08 forms P14, or substitutes, and P35 to reach your HM Revenue & Customs office. You have until midnight on the 19th to file your Return. Penalties are chargeable on any Returns received after this date.

31 May 2008 – Last date for giving a 2007-08 form P60 to each employee who was working for you at 5 April 2008.

6 July 2008 – Last date for your 2007-08 forms P9D and forms P11D, or substitutes, to reach your HM Revenue & Customs office. These forms show details of ‘benefits in kind’ provided to employees, such as company cars or private healthcare.

6 July 2008 – Return of Class 1A NICs on form P11D(b) for 2007-08 to reach your HM Revenue & Customs office. (penalties will be charged automatically on any Returns not received by 19 July 2008)

6 July 2008 – Giving a copy of the 2007-08 form P9D, P11D, or equivalent information, to each relevant employee.

18 July 2008 – If you are not subject to the mandatory electronic payment rules and you post your payment, you should pay all outstanding Class 1A NICs so your payment reaches HMR&C no later than 18 July. Interest will be charged on any payments received after this date (and surcharge in the case of employers who are subject to the mandatory electronic payment rules).

22 July 2008 – Last date for any outstanding 2007-08 Class 1A NICs payments to be cleared in HMR&C’s bank account if you pay by an approved electronic payment method. Interest will be charged on any payments received after this date (and surcharge in the case of employers who are subject to the mandatory electronic payment rules).

VAT Cash Accounting

We seem to be entering a period when banks are likely to have less money to lend, and when they do lend interest rates charged will be “realistic”. The self styled liquidity crisis is with us!

Consequently the management of your cash resources will be critical in the coming months as businesses chase liquidity by tightening up on their credit control. This process will of course be frustrated as creditors hang on to cash reserves by extending the credit they take from suppliers.

If your business qualifies, and you are not already using the scheme, the VAT Cash Accounting scheme could be a lifesaver.

What are the rules of the cash accounting scheme?

  • VAT is accounted for on a payments basis i.e. output tax due on date of payment from a customer; input tax can be claimed when a supplier is paid
  • available to any business with annual taxable sales of £1.35m or less (zero-rated sales are still taxable but exempt sales are not; exclude any sales of capital assets)
  • no application form needed to join the scheme – can be adopted by an eligible business at the beginning of any VAT period
  • before adopting the scheme, a business must ensure it is up-to-date with its VAT returns and payments.

What are the advantages of using the cash accounting scheme?

  • automatic bad debt relief – because output tax is never declared until a payment is made by the customer
  • cash flow benefits by delaying payment of output tax from invoice date until payment is made by a customer
  • simplified record keeping – VAT can be accounted for through a cash book – no need for separate sales/purchase day books
  • the scheme is of particular benefit (for cash flow purposes) to a business that gives extended credit terms to its customers in relation to standard rated sales

What are the disadvantages of using the cash accounting scheme?

  • input tax cannot be claimed until payment is made to a supplier
  • the scheme will not benefit a business where most/all sales are zero-rated e.g. a milkman
  • the scheme will not benefit a business where sales are paid for, either in advance of invoicing, or at the same time a sales invoice is raised

How does a business apply to join the cash accounting scheme?

  • there is no requirement to notify HMRC in advance of using the scheme
  • scheme can be adopted by any eligible user (i.e. taxable sales of £1.35m or less) at the beginning of any VAT period
  • the scheme can only be used from a current VAT period i.e. no retrospective use

Will HMRC ever prevent a business from using the scheme?

  • as long as a business is up-to-date with its VAT returns and payments, and has not been convicted of a VAT offence within the last 12 months, then use of the scheme will always be allowed
  • a business must withdraw from the scheme if its taxable sales exceed £1.6m per year (VAT exclusive)

At what point may or must a business leave the scheme?

  • a business can voluntarily withdraw from the scheme at the end of any VAT period
  • a business must withdraw from the scheme if the value of its taxable supplies has exceeded £1.6m per annum
  • HMRC has the power to impose compulsory withdrawal in order to protect the tax yield

If you would like us to check out the viability of Cash Accounting for your business, please call.