Budget 2007


Personal Income Tax

National Insurance Contributions


Savings & Investments


Capital Gains Tax

Stamp Duty Land Tax

Inheritance Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance

Business Tax

Capital allowances

As with so much of this year's Budget, significant changes to capital allowances were announced - to take effect next year. The existing rates of first year allowances (FYAs) and writing down allowances (WDAs) continue for the next year.

After that:

  • a new annual investment allowance (some form of FYA) of £50,000 for plant will be introduced (details to be announced);

  • WDAs on general plant will be reduced from 25% to 20%;

  • WDAs on long life assets will be increased from 6% to 10%;

  • WDAs on industrial and agricultural buildings will be phased out by 2010/11;

  • Research and development allowances, will be increased.

As part of the phasing out of IBAs and ABAs, there will be no balancing adjustments on disposals of such buildings from 21 March 2007. As these adjustments usually result in a balancing charge for the vendor, this appears to be a favourable change.

Tax Tip

Review the timing of capital expenditure to maximise allowances.

Business Premises Renovation Allowance

A tax relief was announced in 2005 for capital expenditure on renovation of business premises in designated disadvantaged areas where the property has been vacant for at least a year. This 100% relief will now be introduced for expenditure incurred on or after 11 April 2007. Some trades are excluded from the relief (e.g. fisheries, some agricultural businesses).

Construction Industry Scheme

An important current change which was announced three years ago, and which was therefore not mentioned in this Budget, is the major change to the Construction Industry Scheme which takes effect from 6 April 2007. This affects contractors and sub-contractors in the construction industry. All those involved in the industry should be aware of the changes and should be taking advice.

The new system has severe consequences for non-compliance. Withdrawal of entitlement to receive payments without deduction of income tax has serious consequences for cash flow, and there are penalties for failing to make the required returns.

Contractors will also have to sign a new declaration to confirm that they have considered whether their sub-contractors are in fact employees and should have PAYE applied instead.

Managed Service Companies

For some years, the "IR35" rules have targeted people who try to get around the PAYE and NIC charges on employees by setting up "personal service companies" and paying themselves dividends out of profits. An arrangement known as a "managed service company" has been developed by some advisers to get around IR35. Complex rules are introduced with effect from 6 April 2007 to try to make MSCs ineffective.

Tax Trap

If you are involved with a MSC, review your position urgently.

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