Budget 2005


Personal Income Tax

Tax Credits

National Insurance Contributions





Capital Gains Tax

Stamp Duty Land Tax

Inheritance Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance


Value Added Tax

Registration thresholds

>From 1 April 2005, the level of taxable turnover at which a business is required to register for VAT increases by £2,000 to £60,000. The level of predicted future turnover at which a business can deregister also rises by £2,000 to £58,000.

Scale rate charges

If a VAT-registered trader buys road fuel which is put to private use (by a proprietor, partner or employee), the trader has to account for output tax on the supply of the fuel. The fixed scale rates for this charge have been increased with effect from the first accounting period starting on or after 1 May 2005.

The government has announced an intention to bring this charge into line with the income tax charges on the benefit-in-kind of providing free fuel for private use. That charge effectively penalises free use of business fuel by charging more than the benefit is usually worth. This change is still under discussion, and the 2005/06 VAT scale charges are still intended to be in line with actual values.

Tax Trap
Is your business affected by the partial exemption changes?

Partial exemption

A number of technical changes are made to the way the 'partial exemption' rules operate with effect from 1 April 2005. All businesses which are partially exempt will
need to examine these changes in detail.


Local authorities providing childcare or welfare services will be able to recover input VAT incurred in relation to those activities from 1 April 2005. As the government has recently fought a case to the European Court to prevent commercial businesses from recovering input VAT in relation to similar activities, this may lead to further arguments about distortion of competition.

It is proposed that commercial businesses that provide services related to childcare and welfare - such as the provision of videos and other information - will be able to charge a reduced rate of 5% VAT. This will be subject to consultation.

Energy efficiency

A reduced rate of 5% applies to the service of installation of various energy saving materials. From 7 April 2005, this is extended to include the installation of air source heat pumps and micro combined heat and power units.


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