Wednesday, April 22, 2009

Budget tax changes can't help self employed until 2012

Although written in advance of today's Budget I can predict with reasonable confidence that most tax changes announced later will have NO IMPACT on our pockets until January 2012. That's right 2012 (twelve).

Let me explain:

The current tax year (2009/10) started on 6 April 2009. It ends 5 April 2010. There is almost no prospect of the Chancellor changing the rates of income tax that we pay in the current year. The new rates and allowances that took effect from 6 April were announced last year.

In any event, although employees pay tax each week or month through the PAYE system, the self employed pay tax in 3 instalments. If the rate of tax payable for the current year were to change this will only impact the tax paid by the self employed on 31 January 2011.

If, as is more likely we are told of tax changes that come into effect from 2010/11 - then the impact will not be felt by the self employed until 31 January 2012. This is when they will be liable to pay the balance of their tax bills for 2010/11.

The same dates are relevant for Capital Gains Tax. Thus:
For capital gains made in the current tax year - the tax will be payable on 31 January 2011.
For capital gains made after 6 April 2010, the tax will not be payable until 31 January 2012.

Hope that helps clarify things. Now let's see what Mr Darling has in store?

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