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small business from april only 18%tax not 40%??
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Narva
Posts: 233 Forumite
in Cutting tax
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.
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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.0
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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.Debts as of 01/june/08
[strike]Dad 15,500[/strike] [strike]11,000[/strike] [STRIKE]9000[/STRIKE]
[strike]Friend[/strike] [STRIKE]5000[/STRIKE]
[strike]Other 1000[/strike] 0.0
Egg [strike]7633.14[/strike] [strike]6000@0%[/strike]:T0 -
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.0
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