Budget 2016 and the Business Owner

Posted by on Mar 17, 2016 in News Alerts, Newsletters | No Comments

The Chancellor of the Exchequer used the Budget in the UK to unveil some significant tax changes. Albeit, most of these are pledges for the future.

From April 2017:

  • the Personal Allowance will increase to £11,500 and the higher rate threshold will rise to £45,000.
  • a new Lifetime ISA comes into effect where every adult under forty can save up to £4,000 a year either to buy their first home or for retirement with the government adding £1 for every £4 saved.
  • the total annual amount an individual can save into all ISAs will be increased from £15,240 to £20,000.
  • there will be two new tax-free £1,000 allowances one for property income and the other for trading income. Individuals with occasional income below these thresholds will no longer need to declare or pay tax on that income.
  • the ceiling for Small Business Rate Relief will double to a rateable value of £12,000. In addition, there will be tapered relief on properties valued up to £15,000.

Looking further ahead:

  • From April 2018, Class 2 National Insurance contributions for the self-employed will be scrapped. Instead the building of entitlements to the State Pension and other contributory benefits that this covered will be rolled into the Class 4 National Insurance contributions.
  • From April 2018, businesses will need to pay Employer’s National Insurance contributions on redundancy and termination payments above £30,000. For the individual losing their job, payments up to £30,000 will remain tax-free and there will still be no Employee’s National Insurance on any of the payment.
  • From April 2020, the rate of Corporation Tax will be reduced to 17%.

There are some measures that have come into immediate effect such as the move to a graduated rate of Stamp Duty on freehold commercial property and leasehold premium transactions.

Finally, a number of measures come into effect from April 2016, the most noteworthy being:

  • the higher rate of Capital Gains Tax will be reduced from 28% to 20% and the basic rate from 18% to 10% on all gains except those arising from the sale of a second home or investment property where the rates will remain unchanged.
  • the tax rate for company loans to participators that are not repaid within nine months of the financial year-end will increase from 25% to 32.5%.
  • the increase of the VAT registration threshold to £83,000.
  • and from previous Budgets:
    • the Personal Allowance will increase to £11,000 and the higher rate threshold will rise to £43,000.
    • the Dividend Tax Credit is abolished and replaced by a Dividends Allowance of £5,000. Thereafter, new rates of tax on dividend income above the allowance will be 7.5% for the basic rate, 32.5% for the higher rate and 38.1% for the additional rate tax bands.
    • the increase of the Employment Allowance to up to £3,000 for all businesses.
    • the introduction of the National Living Wage initially set at £7.20 an hour for workers aged 25 and above.
    • the reduction of an individual’s Pensions Lifetime Allowance from £1.25 million to £1 million.
    • the introduction of a Personal Savings Allowance of £1,000 for standard rate tax payers (or £500 for higher rate taxpayers) for the interest earned on savings.
    • the Stamp Duty Land Tax premium of 3% on the purchases of additional residential properties, such as second homes and buy-to-let properties.

If you would like to discuss how the Budget 2016 or the new measures that come into effect from April 2016 affect you, please email us at welcome@cooperfaure.co.uk for an initial consultation that is free and without obligation.