Budget 2016: Key Points

background-21657_1920It’s been one week since Chancellor George Osborne announced the latest budget and we have had time to digest the changes and the impacts to businesses and their owners here in the North East of England. Here is a summary of the headline points.

Personal taxation

  • The threshold at which people pay 40% income tax will rise from £43,000 to £45,000 in April 2017.
  • The Tax-free personal allowance is to rise from £11,000 in April 2016 to £11,500 in April 2017

Capital Gains

  • Capital Gains Tax is to be cut from 28% to 20% for higher rate tax payers and from 18% to 10% for basic-rate taxpayers
  • Class 2 National Insurance contributions abolished, which the government says gives a tax cut of more than £130 to three million self-employed workers from 2018

Pensions and savings

  • Annual ISA limit to rise from £15,240 to £20,000
  • Tax relief will now be granted on financial advice
  • New “lifetime” Isa for the under-40s, with government putting in £1 for every £4 saved
  • People who save a maximum of £4,000 towards a home deposit or retirement will get a £1,000 top-up from the state every year until they turn 50

Business

  • Small business rates threshold increasing to £15,000 from £6,000, helping many of our customers who have premises that are in this band.
  • Rate of corporation tax – currently 20% – to fall to 17% by 2020
  • Anti-tax avoidance and evasion measures to raise £12bn by 2020
  • Crackdown on foreign firms selling products online in UK without paying VAT
  • Commercial stamp duty is now;
    1. 0% rate on purchases up to £150,000,
    2. 2% on next £100,000
    3. 5% top rate above £250,000.
    4. New 2% rate for high-value leases with net present value above £5m.

Overall there were some positive steps for small businesses such as the increase to the personal allowances and to the business rates threshold in a budget that the Chancellor geared towards small businesses. Indeed, Mike Cherry, Policy Director at the Federation of Small Businesses, said; “The Chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action to make Small Business Rates Relief permanent and to take many small firms out of the system altogether. The combined measures announced on business rates – the single biggest tax cut in today’s Budget – will be viewed by our members as a welcome and important step on the road to fundamental reform.”