Budget 2006 Introduction Personal Income Tax Tax Credits National Insurance Contributions Employees Savings Trusts Capital Gains Tax Stamp Duty Land Tax Inheritance Tax Corporation Tax Business Tax Value Added Tax Other Measures Tax Tables National Insurance

Business Tax Capital allowances From April 2004 to April 2005, small businesses enjoyed first year allowances of 50% on most new plant and machinery. This was reduced to 40% a year ago, and is increased back to 50% again for another 12 months with effect from 1 April 2006 (companies) or 6 April 2006 (income tax traders). The range of assets which qualify for higher allowances (e.g. "energy saving plant") is unchanged, and cars continue not to qualify for first year allowances unless they have a CO2 emissions rating of up to 120g/km. Tax Tip Delay purchases to enjoy 50% relief. Leased plant Where plant is acquired under a leasing arrangement, traditionally the lessor has enjoyed capital allowances and the lessee has deducted the rental payments as an expense. With effect from 1 April 2006, a "financing transaction" - generally, a lease of 5 years or more - will result in the lessee claiming capital allowances and the lessor only being taxed on a proportion of the income from financing charges. Landlords The 2004 Budget introduced a relief for income tax-paying landlords who carry out works to improve the energy-efficiency of rental properties. Up to £1,500 can be relieved per property, if spent before 6 April 2009. The rules were extended from 7 April 2005 to allow solid wall insulation as well as loft insulation and cavity wall insulation, and are extended again from 6 April 2006 to cover draughtproofing and hot water system insulation. Film relief The previous system of tax incentives for investment in British films gave tax relief to individual investors, and spawned a wide range of tax avoidance schemes which the government has closed down over successive years. As promised last year, this is now replaced by a new system of relief for companies which spend money on making British films. The Chancellor presumably hopes that this will encourage the film industry but not the tax avoidance industry. Income recognition: "UITF 40" A controversial new accounting rule came into force in 2005 which requires income to be recognised as a contract progresses, rather than only when the work is complete and invoiced. The government has responded to protests that this will advance the payment of tax by allowing the uplift in income resulting from the change to be spread over between 3 and 6 years, rather than all being taxed at once. Employee securities On 2 December 2004, the Chancellor announced that tax avoidance schemes based on employee securities would be rendered ineffective from that date onwards, even if the Revenue were unaware of them at that time and they therefore appeared to be effective under the law. This amounts to a "general anti-avoidance principle", or a declaration that retrospective legislation will be applied to such schemes. One measure was announced in the Budget to take effect from 2 December 2004 - the use of options over shares and securities will be fully taxable if it is part of a scheme to gain a tax advantage for employees. On the other hand, there has been a relaxation in the requirement to file "Form 42" for every single situation in which an employee is issued with shares during a tax year. This will now be restricted to those situations which most people would recognise as an "employee share scheme", so excluding the requirement to report straightforward incorporations where the directors are issued with shares.