The Bad News
National Insurance bands are to be
frozen at current levels for the tax year 2003/2004.
Employee's National Insurance will be
deducted at 11% (2002 10%) from 5 April 2003 on pay between £4,615
and £30,420 (maximum NIC payable £2,838.55, compared to £2,580.50).
Pay over £ 30,420 will be subject to
a 1% charge without any ceiling.
This may pave the way for larger
increases in future years
Employer's National Insurance will
increase by 1% to 12.8% from 6 April 2003.
Class IV National Insurance will
increase by 1% to 8% on profits between £4,615 and £30,420, with an
additional 1% being paying on profits above that level.
Small company tax rate reduced by 1%
Starting rate is reduced to Nil so a
small company with taxable profits of £10,000 will have no tax to
pay, effective immediately.
Stamp duty has been abolished on
business property up to £150,000 - good news for property investment
and development companies amongst others.
Capital gains tax for companies will
be cut to 20% for assets held more than 1 year and to 10% for assets
held more than 2 years.
Taper relief on the gains on disposal
of business assets has been accelerated so that after only 2 years of
ownership of the asset only 25% of the gain will be chargeable.
Vat Registration Threshold increased
Small companies will no longer be
fined for the late payment of VAT.
Bad debt relief can be claimed after 6
months without the previous administration of writing to your customer
and informing them that the VAT has been recovered.
Annual Accounting Scheme threshold
increased to £600,000 with effect from 25 April 2002. · In addition
to the above it will now be possible to pay your VAT liability in 3
interim instalments rather than 9 under the Annual Accounting Scheme.
In order to reduce the administration
burden on small companies there will be an optional flat rate scheme -
the VAT liability will be calculated as a percentage of all turnover
where the percentage will be set by industry e.g. 5% for food retail
to 14.5% for IT consultancy.
In order to ease cashflow for
subcontractors in the construction industry, tax deducted under the
CIS scheme can now be offset against PAYE payments due and there will
no longer be a wait until the end of the tax year to reclaim it.
Over the next few years it will become
compulsory to file PAYE returns electronically for certain companies,
for companies with more than 250 employees this will be from 2004/05,
50 or more employees from 2005/06.
For those with fewer than 50 employees
there will be an cash incentive to file electronically from 2004/05 of
£250, tapering to £75 in 2008/09.
There is to be universal electronic
filing from 6 April 2009.
Points for small businesses to consider
Profitable sole traders and
partnerships may consider incorporating to benefit from the lower
levels of Corporation Tax and also to 'cap' National Insurance
Although the flat rate payment scheme
for VAT will save time spent on administration, the rates applied may
not be attractive for your business - you could end up paying more
Small businesses will have to look at
IT investment in order to ensure that they are ready to meet the
Inland Revenue's aims with regard to electronic filing.
For more help and information visit