Chancellor George Osborne’s budget, announced on the 16th March this year has been described as: putting stability first” and offering “long-term solutions to long-term problems”.
The Headline-Grabbers are:
Changes to tax free personal allowance:
From April next year, the amount that can be earned before basic rate tax is paid will rise to £11,500, while the threshold for higher rate tax will be increased to £45,000 (from £42,385).
Cuts in capital gains tax:
Capital gains tax for higher rate taxpayers will fall to 20% from 28%, while for basic rate taxpayers the rate will be cut from 18% to 10%.
The introduction of the Lifetime ISA for the under-40s:
The Chancellor also announced that the amount that can be paid into an ISA will rise in April 2017 to £20,000, while also introducing the Lifetime ISA. In this scheme the government will pay in 20% of the sum paid in, the upper limit for payment being £4,000 a year. Mr Osborne described this as a tax-free way of saving for a pension.
Savers will receive the government bonus added to their Lifetime ISA until they reach 50. The saver can use their Lifetime ISA to buy their first home any time from 12 months after opening the account.
The government expects the Lifetime ISA to be welcomed by the self-employed as a way to save for their retirement, and able to withdraw funds when needed from 60.
Other highlights include:
The economy:
Set to grow by 2% next year, down from 2.4% Growth Forecast as per 2015 Autumn Statement.
Public spending:
The Chancellor said the government’s efficiency drive will continue, with the aim of saving a further £3.5 billion by 2019-2020. In the public sector, employer’s pension contributions are set to increase.
Tax avoidance/evasion: The government is set to crackdown on the use of personal service companies – which will raise £12bn – and disguised remuneration schemes.
Inflation:
Expected to raise from .7% in 2016 to 1.6% in 2017.
The corporate world:
By April 2020, the corporation tax rate will have fallen to 17% from the current 20%. The Chancellor also announced a crackdown on tax evasion, with overborrowing, the hybrid mismatch rules and the use of royalty payments all to come under HMRC scrutiny.
Small business:
Micro- entrepreneurs who rent out their homes. Mr Osborne said: There will be no forms to fill in, no tax to pay – it’s a tax break for the digital age and at least half a million people will benefit.
Individuals who rent out their rooms with incomes below the allowance will no longer need to declare or pay tax on that income, while those with incomes above £1,000 will deduct the allowance.
Small business rate relief (SBBR) will be doubled from 50% to 100% for businesses with a property with a rateable value of £12,000 and below. Businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief, meaning 6,000 small businesses paying no rates at all. A further 250,000 will see their rates cuts. This will represent a tax cut of £7bn for the UK’s small firms, the Chancellor claimed in a “Budget for small businesses”.
Stamp duty:
To raise £500m a year, from Thursday 17 March commercial stamp duty on properties up to £150,000 will be zero. The rate will be 2% on the next £200,000 with a top rate of 5% on £250,000.
Self Employed:
Class 2 National Insurance contributions (NICs) will be consigned to the history books from April 2018. “This will reduce the NICs paid by 3.4 million self-employed individuals by an average of £134 a year”.
Miscellaneous:
Tax relief on financial advice is to be introduced.
Insurance Premium Tax to be raised to 10% from 9.5%, with the extra £700m raised being used to improve flood defences in the north of England. In the transport infrastructure sector, investment will be made in HS3 (Manchester–Leeds), Crossrail 2 (London) and other road and rail projects, mainly in the north of England.
In the health sector, a ‘sugar tax’ will be levied on the soft drinks industry (from 2018). The £520m this measure is expected to raise will be used to fund more sport in schools. In education, all students will study mathematics up to the age of 18.
Indirect taxation:
There will be no increase in fuel duty or excise duty on beer, cider or whisky. Other alcohol duties will rise in line with inflation, with cigarettes rising at inflation plus 2%. Tolls on the Severn Crossing to be halved by 2018.
S P Accountancy 