small business from april only 18%tax not 40%??

Narva

Hi, can someone confirm for me please, is it correct that a small business will only have to pay 18% tax not 40% after 5th april 08. Can my husband do this as a sole trader? I do have an appoinment with accountant in 4 weeks time as i am new to all of this, but could do with having a light at the end of the tunnel, and this would be a glimmer if correct. thanks for reading.

TaxGeek

It's actually capital gains tax that is changing to 18% - that is tax on any gains made selling assets (eg. investment property). Income tax will be 40% for the upper rate (as it is currently) and the basic rate will reduce from 22% to 20%. If your husband is trading, his profits will be subject to income tax (and NI) and not capital gains tax.

bobby-boy_2

Hi you say your husband is a sole trader, as the previous poster stated his profit is subject to personal tax limits. Small business such as limited companies pay the business tax rate which is around 19% as long as their turn over is under 1 million. The inland revenue website will give the exact details.

theculverhouses

You're quite right that it's CGT that's going to 18% from 40% (assuming you were/are a higher rate tax payer). However, HMRC have removed indexation and taper relief on business assets and some non-business assets which was rather useful at getting the gain down a lot more than a bit less tax.

There is something out there called Entrepreneur's relief which you may qualify for; this taxes the gain at an effective rate of 10% which is pretty good.

In terms of what bobby-boy wrote, he's right that company's (i.e. it ends with Limited) pay tax currently at 20% but this goes up to 21% from 1/4/08 and to 22% from 1/4/09 for small companies (those with profits chargeable to tax up to £300,000.

As with all these things, get yourself a good accountant and seek advice early. Ultimately it'll save you money in the long run.