Budget 2007

The Wow Verdict

Gordon Brown has delivered what will probably be his last Budget, which if nothing else has sparked significant interest.

Here are the highlights and our thoughts on this year’s Budget. If you would like to discuss any of these issues in more details, please Contact Us

What the Chancellor will have hoped would be the revelation of his final Budget, cutting the basic rate of income tax from 22% to 20%, was soon derided in some quarters as a bit of a ‘con’. Whether it is a trick, gimmick or con is open to personal opinion, and it won’t come into effect until April 2008 anyway.

Britain is going to be a great place to be a LARGE company in the business of making products for environmentally conscientious consumers. The news is not so good for hard-working, fast growing small businesses though:

• Although the Corporation Tax rate will be cut from 30p on the pound to 28p from April 2008 – the first such cut in a decade – taxes on small businesses will gradually increase to 22p on the pound by 2009 from the current 19%.
• The Brown Budget also aims to encourage greener vehicles and fuels
• There’s also a provision designed to exempt from stamp duty so-called ‘zero-carbon’ homes.

For a more in-depth discussion of how the Budget may effect your personal situation, feel free to call a Wow adviser on 0845 201 1582 or e-mail info@thewowcompany.com with your queries.

The Highlights

• Basic rate income tax will be cut from 22% to 20%, though not until April 2008
• The starting point for the higher 40% tax rate will rise from its current level of £33,300 of taxable income, to £43,000, also in tax year 2008-09
• There is a sting in the tail which will affect those on low incomes. The 10% income tax rate is to be abolished. This currently applies to the first £2,150 of taxable income, so at today's tax rates and allowances, anyone with income of £7,185 will be £215 a year worse off in 2009.
• The rise in the starting point for higher rate tax to £43,000 of taxable income from its current level of £33,300 is worth an extra £1,940 in take home pay for someone with taxable earnings of £43,000 when it takes effect in 2008-09. However, they will be paying an extra £215 a year on the first £2,500 of taxable income so the net gain is £1,725 a year.
• National Insurance contributions will be brought into line in April 2008. So £1,000 of the benefit of raising the starting point for 40% tax to £43,000 of taxable income will be clawed back by the fact that employees will have to pay NI contributions of 11% on just under £10,000 of income on which they currently pay only 1%. The overall net gain is therefore £725 a year.
• For those with taxable incomes up to the current higher rate threshold of £33,300, they will be £666 a year better off because of the 2% reduction in basic rate tax, but £215 of this will be clawed back by the removal of the 10% tax band, leaving them with a net gain of £451 a year.
• The Inheritance Tax threshold will rise to £350,000 for the tax year 2010-11. The thresholds for earlier years have already been announced and stand at £300,000 for 2007-08, £312,000 for 2008-09 and £325,000 for 2009-10.
• The maximum amount which can be put into ISAs rises from £7,000 to £7,200 from April 2008 and an increase in the amount which can be held in cash from £3,000 to £3,600