Budget 2016 update

Budget 2016 update; good news for: savings, ISA investors, small businesses and landlords.

Savings and ISAs

In an effort to prepare for stormy economic conditions ahead the Chancellor has increased personal allowances, and the tax year savings limits on ISAs. He termed this “[acting now] so we don’t pay later”.

From April 2017:

• A new Lifetime ISA will be available for adults under the age of 40. They will be able to contribute up to £4,000 per year, and receive a top up bonus of 25% from the Government. Funds, including the Government bonus, from the Lifetime ISA can be used to buy a first home at any time from 12 months after the account is opened, and can also be withdrawn from 60 years of age to help with retirement.
• The total ISA annual limit will increase from £15,240 to £20,000.

Income, Corporation and Capital Gains Tax

Income Tax:

• For tax year 2016/17 the personal allowance will increase to £11,000 and for 2017/18 it will increase to £11,500.
• For tax year 2016/17 the higher rate threshold, the level after which taxpayers begin to pay 40% tax, will increase to £43,000 and for 2017/18 it will increase to £45,000. The higher threshold is expected to reduce the numbers of individuals paying higher rate tax.

Capital Gains tax changes from April 2016:

• For disposals on or after 6 April 2016 the highest rate of capital gains tax for individuals will reduce from 28% to 20%, and the basic rate will be reduced from 18% to 10%

From April 2020 – corporation tax is to fall from 20% to 17%.

Housing, property and the digital economy

In order to encourage commerce, the Chancellor took several measures to support small business and micro-entrepreneurs. Osborne also introduced tiered stamp duty for commercial properties, and looked at funding to help with housing problems.

From April 2017:

• Homeowners and landlords that let out their properties on economy sharing platforms like Airbnb won’t need to declare or pay tax on the first £1,000 they earn on the platform in the tax year. The same is true for other entrepreneurs that trade different services or products on other sharing economy platforms.

Speaking specifically to boosting a micro-entrepreneur economy the Chancellor said: “We’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet”.

From 17 March 2016:

• The Chancellor has reformed commercial stamp duty introducing tiered payments which; are linked to the value of the property. The new rates will be 0% on properties valued between: £0 to £150,000; 2% on properties valued £150,001 to £250,000; and 5% on any property valued at £250,001 or more. The Chancellor said the new system would raise an extra £500m a year with only 9% of transactions paying more stamp duty than before.

From April 2017:

• Small business rate relief will more than double permanently – from £6,000 to £15,000. The threshold for the higher rate business rates will also be raised. This will see 600,000 small businesses paying no business rates at all from April 2017.

Sugar tax and other duties

• Osborne is increasing duty on tobacco but freezing taxes on home produced alcoholic beverages such as beer, cider, whisky and other spirits.
• Fuel duty is to be frozen for the sixth year in a row.
• The Government will fund longer school days for those that want to offer more activities including extra sport. The funding for extra sports will partly come from the sugar tax or levy on the soft drinks industry. The levy has been introduced because of the increasing problem of child obesity. The levy will raise £520m and will be assessed based on the level of sugar content in soft drinks that are produced, and also the volume of soft drinks sales.

Tax avoidance measures for large corporations and the public sector

• Multinationals that over borrow abroad, and deduct the interest bills against UK profits to reduce their tax bills will be targeted, as will as other tax loopholes.
• The Chancellor said that he will shut down disguised remuneration schemes, ensuring UK tax will be paid on UK property development, and also that he will change the treatment of remote gaming providers as regards tax.
• Osborne also warned public sector companies that they will have to ensure their employees pay the correct tax; rather than allowing them an advantage if they are paid through personal service companies.

Funding increases

• A fund of £115m has been allocated to help the homeless and those sleeping rough.
• Spending on flood defences is to be increased by £700m funded by a 0.5 percentage point increase in the insurance premium tax.

Don’t forget the ISA allowances for this tax year end on 5^th April – use it or lose it!
It’s not too late to contact a Marchwood IFA today, to arrange a consultation. Call 01243 532 635 for friendly up-to-the-minute investment advice.