| Budget 2008 - Savings |
Introduction
Personal Income Tax
Tax Credits
National Insurance Contributions
Employees
Savings
Capital Gains Tax
Inheritance Tax
Stamp Duty Land Tax
Corporation Tax
Business Tax
Value Added Tax
Other Measures
Tax Tables
National Insurance |
Pension contributions (Table B)
The maximum amount of a tax-efficient pension fund from which benefits are drawn in 2008/09 is £1.65m. The maximum employer contribution to a pension fund that will enjoy tax relief is £235,000; if an employee or self-employed person contributes personally, tax relief will be available on a gross premium of up to 100% of current year earnings up to the same £235,000 annual limit.
The drop in the basic rate of income tax to 20% will lead to an increase in some personal pension contributions. These are normally paid net of basic rate tax, so the premium has been 78% of a gross amount - this will rise to 80% of the gross figure from 6 April. A higher rate taxpayer will still enjoy 40% tax relief overall, but the higher rate relief will come later through the tax return.
Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs)
The rules for ISAs and PEPs change significantly on 6 April 2008, as announced
last year:
- "Mini and maxi ISAs" are abolished.
- Up to £3,600pa can be invested in a "cash ISA".
- Up to £7,200pa, less what has been invested in cash, can be invested in a "stocks and shares ISA" with the same or a different provider.
- Existing cash mini-ISAs, TESSA-only ISAs and the cash component of maxi-ISAs will be converted to cash ISAs.
- Existing stocks and shares mini-ISAs, the share component of maxi-ISAs and PEPs will be converted to stocks and shares ISAs.
Investors will be permitted to move money from cash ISAs to stocks and shares ISAs.
| Tax Tip |
| The tax breaks on ISAs are particularly beneficial to 40% taxpayers. |
Enterprise Investment Scheme (EIS)
Investment in new shares in small trading companies can qualify for 20% income tax relief. The annual limit on investment rises in 2008/09 to £500,000 (2007/08: £400,000). EIS investments also allow the deferral of charges on capital gains. The annual limit does not apply to deferral relief.
Foreign shares
Dividends on UK company shares are liable to tax at the basic rate of 10% or higher rate of 32.5%, but they come with a 10% tax credit which covers all or part of the liability. Foreign share dividends have been taxed at the same rates, but up to now have not enjoyed a tax credit. From 6 April 2008, most dividends from foreign companies received by UK taxpayers will also be treated as entitled to a 10% credit against the tax liability. This cannot be reclaimed by a non-taxpayer.
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