|
Contents Employment issues |
|
|
|
|
|
|
|
|
|
|
|
 |
Tax rates The new 10% starting rate of income tax took effect on 6 April 1999 and for 1999/00 applies to the first £1,500 of taxable income. Originally the 10% was not to apply to savings income, but this decision was reversed in the November 1999 Pre-Budget report. Comment The original exclusion of savings income from the 10% starting rate for 1999/00 was felt to be inequitable and after a re-think the Government announced a change of heart. Some individuals may be due a repayment of tax for 1999/00 as a result. For 2000/01, the 10% starting rate will apply to taxable income up to £1,520 from whatever source. The basic rate of income tax is reduced to 22% with effect from 6 April 2000 and the higher rate remains at 40%. The basic rate of tax will apply to taxable income from £1,520 up to the new higher rate threshold of £28,400. Savings income continues to be taxed at 20% on income in the basic rate band and 40% above that. The rates applying to dividend income will be unchanged; 10% for income below the basic rate limit and 32.5% above that. It’s hard to remember that this is all supposed to be part of a simpler tax system! |
|
Allowances The personal allowance will rise to £4,385 for 2000/01. For those aged 65-74 the corresponding figure will be £5,790 and £6,050 for those aged at least 75. The income limit for age related allowances will be increased to £17,000. As announced in the 1999 Budget, the married couple’s allowance (MCA) for people aged under 65, additional personal allowance and widow’s bereavement allowance are abolished from April 2000. In addition, tax relief for maintenance payments will only be retained where one or both of the parties to the marriage is aged 65 or over at 5 April 2000. The MCA remains for couples where at least one spouse is aged 65 or over before 6 April 2000. From that date it will only be possible to make new claims for the MCA where a person born before 6 April 1935 gets married. Comment Many of those who were eligible for the MCA will instead become eligible for the new children’s tax credit. The new credit will be available to families who have children living with them. However, although the MCA is abolished in April 2000 (except for the over 65s) the new credit is not introduced until April 2001. In 2000/01 no allowance or credit is available. |
|
Pensions The maximum earnings for which tax allowable pension contributions can be made is increased from £90,600 to £91,800 from 6 April 2000. |
|
Mortgage interest relief As previously announced, mortgage interest relief is withdrawn from 6 April 2000. Home income plans for the over 65s set up before 9 March 1999 continue to qualify for tax relief for the duration of the plan. |
|
Children's tax credit This tax credit will be introduced from April 2001 to replace the married couple’s and associated allowances which are withdrawn from April 2000. It will take the form of an allowance for which relief is to be given at 10%. In 2001/02 the amount will be £442 ie £4,420 at 10%. This tax credit will gradually be withdrawn where the person claiming it is a higher rate taxpayer. |
|
Individual Savings Account (ISA) subscription levels The previously planned reduction in the ISA limit to £5,000 for 2000/01 will be deferred until the tax year 2001/02. For the tax year 2000/01 savers may continue to subscribe up to £7,000 overall of which no more than £3,000 may go into cash and £1,000 into life insurance. |
|
Improvements to the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) scheme Changes were announced to improve the way in which the schemes work in order to make them more attractive to investors and benefit small higher risk companies seeking funding. The most significant change is to reduce, with effect for shares issued on or after 6 April 2000, the minimum holding period to qualify for income tax relief from five years to three years. Further changes will: prevent tax reliefs under both schemes being put at risk if the company in which an investment has been made goes into receivership; safeguard VCT investors’ reliefs where a company in which the VCT has invested is sold, merges or undergoes a capital reconstruction, and the VCT receives shares rather than cash. Top of page / contents |