The standard rate of VAT has been cut from 17.5% to 15% for a thirteen month period starting on 1st December 2008 and finishing on the 31st December 2009.

From Monday 1st December the VAT on any sales that were VATable at 17.5% will now need to be charged at 15%.

If you are on the Flat rate scheme the VAT rates have also been altered. Please click here for a table of the new rates and contact us for further advice.

The aim of this cut is to encourage consumer spending, and while this reduction will be welcomed by most, the VAT registered trader will incur increased compliance costs when they implement the changes. Please be aware that you are not obliged to pass on the VAT reduction if you do not wish to do so.

The personal tax allowance increased to £6,475 and the basic rate tax limit to £37,400 with effect from 6th April 2009.

From 6th April 2010 individuals with income over £100,000 the personal allowance will be reduced by 50p for every £1 over £100,000 earned until the personal allowance is halved. For those who earn more than £150,000 they will see no personal allowance at all.

From 6th April 2011 there will be a new 45% tax rate for individuals earning over £150,000.

From 6th April 2011 national insurance is being increased by 0.5%. This will be an increase in both employees and employers contributions, as well as in self employed class IV contributions.

The increase in the small company corporation tax rate from 21% to 22% planned for 1st April 2009 has now been deferred until 1st April 2010.

For accounting periods ending between 24th November 2008 and 23rd November 2009 any losses can be carried back for up to three years. This relief is capped at £50,000 for losses carried back to the second and third preceding year.

From 6th April 2011, the rate of tax payable on non-dividend income will be increased from 40% to 45%. The effective rate of tax payable on dividend income will therefore increase to 30.5%. These rates will not be affected by the amount of income that the trust generates.

For the financial year 2009/10, business property with a rateable value of less than £15,000 will qualify for an exemption from business rates, this will apply to around 70% of empty properties.

Also for businesses that are paying backdated business rates, there will be the ability to pay in eight interest free instalments

A dedicated business payment support service has been introduced. The idea of this service is that it will become easier to make arrangements with HMRC in respect of asking for more time to pay taxation liabilities. You should note that the rules on due dates have not changed and penalties and interest can still be added to late paid taxation liabilities.

The government’s plans to introduce ‘Income Shifting’ legislation have now been deferred, and with the current downturn a timescale has not been published. Income shifting is where a business extracts its profits through dividends to the person who pays tax at the lowest rates regardless of their involvement in the business, and it was a loophole that HMRC have been working to close. Beware! It has only been deferred and it will no doubt be introduced at some point.