Budget 2016 highlights for business owners and private individuals

18/03/2016

Today’s announcements were hailed by George Osborne as a budget for the next generation, aimed at delivering stability and benefits over the longer-term. With the media widely predicting another ‘surprise’ , it didn’t materialise – though the reduction in Capital Gains Tax rates for some and the extension of Entrepreneur’s Relief to more gains was unexpected.

Here’s our brief summary of the highlights that we think businesses and private individuals will be most interested in. Look out for more detail from us in the next couple of days.

Immediate (or almost immediate) effect

• New non-residential property stamp duty land tax (SDLT) rate bands will apply from 17 March 2016 which includes a 0% rate for the first £150,000 of the transaction value. SDLT will be charged at each rate on the portion of the purchase price which falls within each rate band. Rates for leasehold rent transactions will also change.
• Entrepreneur’s Relief will be extended to external investors in an unlisted trading company for ordinary shares that have been newly issued to the claimant and acquired for new consideration on or after 17 March 2016 and held for three or more years from 6 April 2016.

From April 2016

• The rate of Capital Gains Tax payable on the sale of an asset will reduce to 20% (currently 28%) for higher rate tax payers and 10% (from 18%) for basic rate tax payers, although there will be a surcharge of 8% on carried interest as well as gains from residential property sales, removing any benefit for buy-to-let landlords.
• Entrepreneur’s Relief will be extended to external investors in an unlisted trading company for shares acquired after 17 March 2016 and held for three or more years from 6 April 2016.
• The rate of tax on loans to participators (currently 25%) will be linked to the dividend upper rate (32.5% from 6 April 2016) to ‘encourage’ participators to extract cash as income rather than as a loan.
• Duty on fuel, beer, cider, whisky and other spirits to remain frozen (although there will be increases on the duty for other alcoholic drinks).
• As announced in the Autumn Statement 2015 and following consultation, higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3% points above the current SDLT rates.

From April 2017

• Small business rate cuts will mean that those occupying commercial property with a rateable value of £12,000 or less will pay no rates.
• ISA limit will increase to £20,000 investment allowance per year.
• Under 40s will be able to start a lifetime ISA which they can use to save for a mortgage or as a pension. Savers will receive a 25% bonus and withdrawals will not be taxed on exit.
• Personal allowance will increase to £11,500 (£11,000 from 6 April 2016).
• The higher rate income tax threshold will increase to £45,000 (£43,000 from April 2016).

From April 2018

• Class 2 national insurance contributions will be abolished for the UK’s 3.4 million self-employed.
• Employers will pay national insurance on termination payments exceeding £30,000 which are currently exempt from tax and both employee and employer national insurance.

From April 2020

• Corporation tax to be cut further from the previously announced rate of 18% to 17%.

Dates to be announced for:

A range of measures being implemented over the next 5 years to level the playing field between small and global businesses through changes to the rules on tax and interest so they pay more tax in the UK.
Agencies and public bodies engaging workers who operate under a personal service company will become responsible for deciding if the intermediaries legislation (IR35) applies and then deducting appropriate tax and national insurance contributions.

A more detailed summary of the changes introduced in the budget and their likely impact for business owners and private individuals will follow later this week. In the meantime, if you have any immediate concerns or queries, please speak to your usual WMT tax advisor on 01727 838255 or contact Anne-Maree Dunn.