Budget 2004



Summary                                                  Tax Tips for Individuals

Small Companies                                       Tax Tips for Businesses


Individuals                                                Third World





Small limited companies still pay no tax on the first £10,000 of profits, but only if they don't pay any dividends.
Companies will pay corporation tax of at least 19% on all profits paid out as dividends.
Most allowances increased in line with inflation.
Tax incentives to invest in Venture Capital Trusts increased.

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Tax Tips for Individuals

1.      Make sure you claim the childrenís tax credit.

2.      Consider taking a salary increase instead of the company car, then using your own car for business and claiming mileage.

3.      If your employer is not paying you the full 40p per mile, then claim the difference on your tax return.

4.      If you donít like paperwork, then go to www.inlandrevenue.gov.uk and register to prepare your own tax return using the internet service or contact an accountant who is registered for agent efiling.

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Tax Tips for Businesses

1.      If you are not already benefiting from the low corporation tax rates, then consider forming your own limited company now. Trading through a limited company could still save you over £3,000 per year. This is true even after the new taxes on dividends introduced in Budget 2004.  Small Businesses

2.      If you spend more than £25,000 a year on research and development, then make sure you or your accountant are claiming the research and development tax credit.

3.      If you donít like paperwork, then look into the VAT Flat Rate Scheme. The incentives have recently been increased, particularly for businesses in their first year of VAT registration.

4.  If your profits are under £50,000 a year then pay dividends before 1 April 2004 to avoid the new tax rules.

5.   If you are planning to buy any computer equipment, then buy it before 31 March 2004, while the 100% capital allowances are still in available for small companies investing in IT.


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New Corporation Tax Rules

All dividends paid on or after 1 April 2004 must be paid out of profits on which corporation tax has been paid at 19%.

This will not affect companies with profits over £50,000, because they are already paying corporation tax at 19%.



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Research & Development Tax Credits

Since April 2000, small and medium sized companies spending over £25,000 on research & development (r&d) have been able to claim tax credits on most of their r&d expenditure. In some cases a tax refund of 24% of r&d spending can be obtained. Qualifying expenditure is salary costs, consumable stores and 65% of payments for sub-contracted r&d work.

This scheme has now been extended to large companies.


Subsidised Bus Travel

Where an employer pays a subsidy to a local bus company, employees can be carried free or pay reduced fares without creating a tax and national insurance contributions (NICs) liability.

With this exemption and the new company car tax regime, some companies may start offering bus passes instead of company cars.


Limits for operating PAYE

The threshold for tax and National Insurance has been increased from £89 per week to £91 per week (or from £384 to £395 per month).


Incentives for E-filing PAYE Returns

Small business that file their 2004/05 PAYE returns electronically will be given a £250 incentive.

VAT Flat Rate Scheme

The scheme is now available to businesses with taxable turnover of up to £150,000 per annum. The flat rates have been reduced and their is an extra 1% reduction on the rates for business in their first year of VAT registration. Under the scheme, a business completes its VAT Returns by taking turnover and multiplying by an agreed percentage and thatís it. Details of the flat rates for particular businesses can be found at www.hmce.gov.uk

No analysis of VAT on purchases is required.


Enhanced Capital Allowances for Energy Efficient Equipment

100% capital allowances are available for certain items of plant and machinery, including cars with fuel emissions of not more than 120gm/km CO2. The scheme is being expanded

See www.eca.gov.uk for details.


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Tax Rates and Allowances

The personal allowance is increased from £4,615 in 2003/04 to £4,745 for 2004/05. The 10% band is increased from £1,960 to £2,020. The starting point for the 40% band is increased from £30,500 to £31,400.



Gift Aid

From 2003/04 gift aid donations made up to the time that you file your tax return can be carried back into the previous tax year.

Gift Aid is being extended to cover donations to amateur sports clubs.

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In February it became a criminal offence for a UK citizen to bribe a foreign official.

From 1 April 2002 bribes are not tax deductible.


Drug Research Into Third World Diseases

Expenditure on research into TB, malaria, HIV and AIDS qualifies for an extra 50% deduction for corporation tax purposes.


Corporate Donations of Medical Supplies & Equipment

The new relief will enable companies to donate medical supplies or medical equipment for humanitarian purposes to recipients that are not UK charities without incurring a charge to tax. Companies will also be entitled to deduct the cost of transporting, delivering or distributing goods donated for humanitarian purposes within or outside the UK.

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Last modified: November 30, 2008