Pre-Budget Report: Changes to business taxes and VAT The Pre-Budget Report included a number of significant changes for business taxes and VAT.

To end the perceived abuse of the "zero percent" starting rate of corporation tax, the Chancellor announced that the starting rate will be increased to 19%. In consequence of this change, the complex rules on non-corporate dividends will become redundant.

To continue to encourage investment by small businesses, the rate of first-year capital allowances will increase from 40% to 50% from April 2006.

VAT To assist more small traders with their cashflow, the threshold for the VAT Annual Accounting Scheme turnover will be doubled to £1,350,000 from April 2006.

Application has been made to the European Commission to have the rules amended to allow the Cash Accounting Scheme turnover threshold to be increased to the same level.

Budget 2005 intimated that the VAT fuel scale charge would be reformed to follow a carbon emissions basis in line with company car tax and fuel benefit charges.

After consultation, it has been decided that the new system will come into force on 1 May 2007.

Whatever your accounting needs we can help. Please read our FAQs or simply click here to contact us and we will contact you within 24 hours.