2016 Budget Summary
The Chancellor of the Exchequer, George Osborne delivered the second Budget of this Parliament on Wednesday 16 March.
He stated that the United Kingdom was facing turbulent times with a “dangerous cocktail of risks” heading our way.
Despite the somewhat gloomy start the Budget contained a number of surprises together with confirmation from the Office of Budget Responsibility that the economy is still on course to grow by approximately 2% per annum over the next 4 years.
The main points of tax interest from the Budget Speech are as follows:
Increases in the tax free personal allowance are confirmed at:
2016/17 – £11,000
2017/18 – £11,500
The band at which taxpayers start to pay tax at 40% will increase to £45,000 in 2017/18 (inclusive of personal allowance).
The rate of corporation tax will be cut again on 1 April 2020 to 17%.
The Loans to Participator tax rate (Section 455 Tax) will be increased from 25% to 32.5% this April. This aligns the rate with the new higher rate of dividend tax.
Class 2 National Insurance will be abolished from 6 April 2018. The entitlements to State Pension and other benefits attaching to Class 2 payments will be transferred to Class 4 NIC.
The compulsory registration threshold increases from £82,000 to £83,000 on 1 April 2016. The deregistration threshold will be raised to £81,000.
Capital Gains Tax
The tax rates applying to capital gains will be reduced on 6 April 2016 to 20% (at the higher rate) and 10% (at the lower rate). However any gains relating to residential property will still be taxed at the existing rates of 28% and 18% respectively.
Legislation will be introduced specifically relating to Contractors of Public Sector Bodies which shifts the responsibility for applying the correct tax treatment of the engagement from the contractor’s own company to the hiring Body (or recruiting agency if one exists in the chain).
From April 2017 there will be two new tax allowances of £1,000 relating to trading income and property income. Its aim is to take taxpayers with small amounts of such untaxed income out of the tax system all together and promote the “sharing economy”.
From 1 April 2017 full Small Business Rate Relief will apply to properties with rateable values up to £12,000 and tapering up to a value of £15,000. The increases will mean that 600,000 business will no longer pay rates.
The ISA limits will increase in April 2017. The annual subscription limit will rise to £20,000 and a new Lifetime ISA will be available for adults under 40. The annual subscription limit for the Lifetime ISA will be £4,000 and the Government will add up to £1,000 at the end of the tax year. The funds can be used to purchase a first home or can be withdrawn for any other purpose when the investor reaches 60.
The 100% first year allowance for Capital Allowances on the purchase of a low-emission car will be extended to April 2021. However, from April 2018 only cars with CO2 emissions of 50g/km and below will qualify for the allowance.
Insurance Premium Tax (IPT) will be increased to 10% (from 9.5%) on 1 October 2016.
Soft drinks producers and importers will have to pay a levy on drinks with added sugar above 5 grams per 100 millilitres. The levy will be introduced in April 2018.
Fuel Duty and the duty on beers and spirits will be frozen for a further year.
New Stamp Duty rates will be introduced on the purchase of commercial property with immediate effect on 17 March 2016. The first £150,000 will be at zero per cent, the next £100,000 will be at two per cent rising to five per cent over £250,000.
If you have any questions regarding the budget or any other accounting or taxation matters please don’t hesitate to contact us.