Tax Services News


Changes to the Personal Allowance

The Pre-Budget Report was announced on 24 November 2008 and the following changes were announced:

Changes from April 2009
  • The basic personal allowance will increase to £6,475 from 6 April 2009.

Changes from April 2010

  • Where an individual’s income is below the £100,000 income limit, they will continue to be entitled to the full personal allowance (which has not yet been set).
  • Where an individual’s income is above the income limit of £100,000, the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.
  • Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the second limit up to a maximum of the full amount of the basic personal allowance.


Changes to the Residency and Domicile Rules

The main changes to the residence and domicile rules were enacted in the Finance Act 2008, which received Royal Assent on 21 July 2008.

From 6 April 2008, individuals who claim use of the remittance basis of taxation are not entitled to claim any of the personal income tax allowances or the annual exemption for capital gains tax (CGT). This applies to individuals who are resident but not ordinarily resident in the UK, and to those who are resident but not UK domiciled.

Furthermore, Non-UK domiciled individuals who are resident in the UK and have been resident in more than 7 of the previous 9 tax years, may only claim the remittance basis if they pay a £30,000 annual charge. Part years of UK residence will count towards the seven years. There are exceptions to this rule.

The tax treatment of offshore structures may also be impacted by these changes.

The new rules are complex and you should seek professional advice if the changes are likely to affect you.

Transferability of the Nil Rate Band

Every individual in the UK has their own Nil Rate Band (NRB), upon which no UK inheritance tax (IHT) is chargeable on death. For 2008/09 the NRB is £312,000.

In the Pre-Budget Report of October 2007 the Chancellor announced that, to the extent that the NRB of the first to die has not been used, it can be carried forward and utilised on the death of the surviving spouse or civil partner. Therefore, the NRB is no longer wasted if the couple have not set up wills making use of the NRB of the first to die.

The rules had immediate effect and have since been confirmed in legislation under the Finance Act 2008.

We do, however, still recommend that individuals prepare wills in order to ensure all tax reliefs and exemptions are fully utilised and their wishes as to the devolution of their estate are documented.

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