Posts tagged ‘Insurance Rate’

Along with the England flags and hopes of World Cup success the emergency budget is becoming a distant memory, but if you are in business you shouldn’t be so hasty.

Here at George Hay, we regularly advise on the advantages of incorporation and strongly believe that for the majority of small businesses it is the most tax efficient structure, as remuneration (profit distribution) for the owners/directors can be carefully planned to benefit their personal tax circumstances.  These savings can be particularly advantageous if you are operating as a family business.

Corporation Tax reduction

One of the main headlines of the budget was the reduction in the Corporation Tax rate by 1% making the Small Companies rate 20% from April 2011. This was good news for business owners but of course it only applies to those which are incorporated. Those who operate their business as either a sole trader or partnership are subject to Income Tax and National Insurance on their business profits so will instead be hit by the rise in National Insurance rates from April 2011.

The changes in the Corporation Tax rate and National Insurance rate along with forecast reductions in the basic rate threshold for individuals poses the usual question of should those in business consider incorporating and is it beneficial for everyone to do so?

Indicators do strongly suggest that it is widely beneficial for most owner managed businesses to incorporate and when doing the sums at the new rates from April 2011 the tax savings as a result of incorporation increase even more.

Risky Strategy?

There have been many attempts to try to curb the incorporation trend in the past due to the significant tax savings that can be achieved.  Gordon Brown aired his view that business owners are not paying the ‘right amount of tax’,  and we are sure HMRC will continue their expensive and difficult case in the courts.   But I personally have been advising on incorporation for over 10 years and it continues to be a successful strategy, so why not take advantage whilst the regulations allow it?  It is not something that can not be withdrawn from if circumstances change.

Real life example

In 2007 I was recommended to a small business that was earning very handsome profits due the unique nature of its trading activity.  On engagement I quickly did some sums (good old Excel!) and explained the value of Incorporating.  The owner immediately understood and asked me to incoporate the business without delay.  By involving his wife in the business strategy, she was able to take a ‘very nice’ Company Car and between them they saved and continue to save over £15,000 per annum in Tax and National Insurance.  If only they had sought advice years before…..

It’s not all about tax

Careful consideration should be given to incorporation and expert advice sought. It is not always the right choice for everyone and other factors come into play such as legal liability, increased regulation and therefore costs, disclosure of financial information and future business plans such as sale of the business but it is always worth thinking about.


For further details on the key announcements in the ‘Emergency Budget’ download a copy of our budget summary.

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.


The new Chancellor, George Osborne  delivered his first budget on 22 June 2010. He said his budget was ‘tough  but fair’ but described it as being ‘unavoidable’ due to ‘the years of debt and spending’ by the previous labour government.

News PhotoThe Chancellor’s package included various tax increases and spending cuts, some measures had been widely anticipated such as the increase in the VAT rate and an increase in Capital Gains Tax. The Chancellor stressed that his measures were intended to be fair ‘Everyone will pay something but the people at the bottom of the income scale will pay proportionately less than those at the top’.


As tax is not my preferred subject (I have highly experienced colleagues for dealing with that!) I will be brief:

The key announcements included:

VAT Rate rise – As anticipated the VAT rate will increase from 17.5% to 20% with effect from 4 January 2011.

Personal Allowance increase – The personal income tax allowance is to increase by £1,000 in April 2011 to £7,475. This is worth £200 a year to a basic rate taxpayer.

Capital Gains Tax increase – The Capital Gains Tax rate for higher rate taxpayers will increased from 18% to 28% from 23 June 2010. It remains at 18% for basic rate tax payers.

Entrepreneurs Relief extended – Entrepreneurs relief has been extended to a rate of 10% on the first £5m of gains as opposed to the first £2m.

Corporation Tax Rate cut – The Corporation Tax rate will be cut by 1% each year over the next four years until it reaches 24%. The Small Companies rate is to be cut to 20%.

National Insurance rise to stay – The National Insurance rate increases announced by labour remained intact and will still take place however the threshold at which employers start to pay will rise.

No change to Cigarettes, Alcohol and Fuel – No changes were made to duty on cigarettes, alcohol or fuel and the plan to increase the duty on cider from July was scrapped.

Freeze on Child Benefits – Child benefit is to be frozen for the next three years.

Changes to Tax Credits – Tax credits will reduce for families earning over £40,000 next year but for low income families they will receive more Child Tax Credit with the amount per child increasing by £150 above the rate of inflation.

State Pensions – The state pension is to be linked to earnings from April 2011 and is guaranteed to rise in line with earnings or 2.5% whichever is greater. The increase in the state pension age to 66 is to be accelerated.

For further details on the key announcements download a copy of our budget summary.

Alternatively come along to one of our Budget Seminars which we are holding on the 24th and 25th June where we will be providing planning advice as a result of the changes.


Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.