Spring Budget 2016
Kenneth Simpson - March 21st, 2016
On 16 March 2016 George Osborne presented his latest Budget. Below we aim to provide a very brief summary of the policies contained within the Budget Statement that we feel are most relevant to our business and personal tax clients. Some had already been announced, but others were completely new on the day.
Legislation already announced
In recent years the advance measures announced in the Chancellors’ annual Autumn Statement have tended to foreshadow many of the major tax changes in the following years’ Spring Budget. Extending this trend, the March 2016 Budget contained numerous policies previously set out in not only the Autumn Statement, but also in the Summer 2015 Budget which followed the 2015 General Election. These included:
- Details of the new Living Wage
- General increases in tax allowances and tax bands
- The reform of the dividend tax system
- Personal savings allowances of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers
- Legislation to take the family home out of Inheritance Tax (point seven)
- Restricting the rates at which “wealthier” landlords obtain relief against rental income
- The continued reduction in Corporation Tax rates
- The introduction of a higher rate of Stamp Duty Land Tax on additional properties, being 3% higher across the board
Many of these changes finally came into force on 6th April 2016, and were mentioned again as part of the recent Budget.
New policy announcements
There were however some important new policies set out for the first time in the March Statement, and those which we believe will be of most interest are set out below:
The rate of Capital Gains Tax has been reduced from 18% to 10% (basic rate) and 28% to 20% (higher rate) on disposals (excluding property) after 6th April 2016. This was a surprise and could lead to much reduced tax bills on, for example, share disposals that do not qualify for Entrepreneurs Relief.
A new type of Lifetime ISA is to be created from April 2017 which will enable adults under 40 years of age to contribute up to £4,000 p.a. and receive a 25% Government bonus. It has been suggested that this may provide an alternative to saving for retirement via pensions.
There are to be further changes going forward in Personal Allowances, tax bands, Corporation Tax rates (as far as 2020!) and VAT thresholds. Of particular interest is the continuing reduction in the rate of Corporation Tax to 17% by 2020 – the main rate having been 28% as recently as 2010.
From April 2017, there is to be a new £1,000 general allowance available against property and trading income. The way that this will work is that no tax would be payable if income is below £1,000, while the taxpayer may simply deduct £1,000 against his income (if it is greater than £1,000) as an alternative to claiming actual expenses.
Class 2 National Insurance is to be abolished from April 2018. The Government intends to set out in due course how the self-employed will access contributory benefits once Class 2 ceases.
The rate of Small Business Rate Relief is to be doubled from April 2017, while the threshold at which it becomes available is also to be increased. As a result all businesses with a rateable value of less than £12,000 will then obtain full relief, potentially affecting many of our current clients.
Of more general note, and something that will become more of a news item over the next couple of years, the Chancellor continued his drive towards a Digital Tax system by announcing that from 2018 all businesses, self-employed traders, and landlords who keep digital records and provide digital updates to HM Revenue would be able to make pay-as-you-go tax payments in managing their liability. Watch this space….
How we can help
If you feel that any of these points may be relevant to your situation and you want to find out more, please contact us to discuss and obtain further information. We are currently working with our clients in planning ahead to ensure that they maximise opportunities made available by these and other changes in the tax system, and are made aware of relevant issues that may affect them. Our aim as accountants is not merely to reflect historical transactions, but to pro-actively influence future decision-making that will hopefully benefit our clients’ businesses and personal tax affairs.