Budget 2008


Personal Income Tax

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Capital Gains Tax

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Corporation Tax


The main rate of Corporation Tax (for companies with profits over £1.5m) falls from 30% to 28% with effect from 1 April 2008. The small companies rate (for companies with profits up to £300,000) rises from 20% to 21% on the same date, and will rise to 22% from 1 April 2009. The effective marginal rate for profits between £300,000 and £1.5m in the year to 31 March 2009 will be 29.75% (down from 32.5%).

Associated companies

The profit limit of £300,000 for small companies rate has to be divided between "associated companies". These are companies "under common control", determined according to complex rules which can produce unfair results. For example, a person is deemed to own shares held by business partners and close relatives in determining whether a company is controlled. This has created difficulties for investors in film partnerships and private equity firms, who may be in partnership with people who own shares in many companies that they cannot know about. From 1 April 2008, shareholdings of business partners will only be counted in determining entitlement to small companies rate where the holding has been split between them to obtain the benefit of that lower rate.

Research and development

The enhanced tax relief for expenditure on research and development will increase to 175% (small/medium companies) and 130% (large companies) once European State Aid approval is granted.

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