Budget gets MPs approval.
On 16 March, the Chancellor unveiled his eighth, and what has arguably become his most controversial Budget to date.
Once the details were announced, George Osborne’s claim that this Budget was putting “the next generation first” were immediately challenged, with planned
reductions in disability benefits set against tax cuts for the better off.
The fallout from the proposed changes to welfare benefits saw the resignation of a Cabinet minister and the
Chancellor forced to defend his Budget in the House of Commons. As a result, the plans to cut disability benefits were scrapped and MPs voted to approve the Budget on 22 March.
So now that the Budget has been given the green light, let’s look at the tax changes and how it will affect you.
With an emphasis on individuals, this Budget favoured savers, middle class earners and small businesses overall.
Corporation tax rates fall
Currently 20%, the headline rate for Corporation Tax will fall to 19% on 1 April 2017 and drop to 17% by 2020.
The government claims this cut will benefit over a million companies.
Business rates relief threshold increased
The annual threshold for 100% relief on business rates for small companies will rise from £6,000 to £12,000. These measures will see 600,000 small firms exempt from business rates.
Rise in VAT threshold
From 1 April 2016, the VAT threshold will increase from £82,000 to £83,000 and the deregistration threshold from £80,000 to £81,000.
Stamp duty rise
As reported in our last blog , Stamp Duty will rise by an extra 3% from 1 April 2016, for additional properties such as buy-to-let or second homes. The Budget has confirmed that significant property investors will not be exempt from the 3% higher rates.
Loans to participators
There will be an increase in the rate of tax payable by close companies under the loans to participators rules. The tax rate will increase from 25% to 32.5% on 6 April 2016.
Allowances for ‘micro-entrepreneurs’
From 1 April 2017, two new £1,000 allowances will be available for micro-entrepreneurs. Individuals with property or trading income below the £1,000 threshold will no longer need to declare or pay tax on that income.
Income tax threshold increased
The government has announced that the income tax personal allowance will rise from £11,000 in April 2016 to £11,500 in April 2017.
For higher rate taxpayers, the threshold will increase from £43,000 to £45,000 in April 2017.
Class 2 National Insurance contributions abolished
From April 2018, Class 2 NICs will be scrapped. So for the self-employed, they will see the disappearance of the £2.80 per week contribution and, according to the Treasury, this will mean an annual tax cut of over £130 on average to 3.4 million sole traders and partners.
Capital Gains Tax reduction
The higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate will fall from 18% to 10%. However for residential property disposals, the rates will remain at 28% and 18%.
From 6 April 2017, the cash ISA allowance is rising from £15,240 to £20,000.
In a surprise move, the new Lifetime ISA was also unveiled. Available from April 2017 for the under 40s, individuals will be able to save up to £4,000 per year, to which the government will add 25% on top. Funds can be used to buy your first home or for your retirement.
General Budget round-up
Insurance Premium Tax (IPT) rise
IPT is due to rise from 9.5% to 10% from 1 October 2016.
Seven days a week for HMRC
As part of its £71 million investment plan into HMRC, the government has announced an overhaul of its customer
service systems. Improvements will include phone lines open seven days a week and a new secure email service.
What about you?
If you’re one of our clients, we’ll be in touch with you soon to discuss the best approach for you following the Budget.
If you’re not a client and you want to know how the Budget will affect you or your business, get in touch with us on 01299 488860.
Do you need Tax Accounting Consultancy? Contact Perrigo Consultants today!