George Osborne presented the 2016 Budget on Wednesday 16 March 2016.
This blog focuses on the direct and indirect tax measures announced, as well as the announcements made previously which affect the 2016-7 tax year and beyond.
It concentrates on the issues likely to affect you, your family and your business.
If you have any questions please do not hesitate to contact me for advice.
Main Budget proposals
- The personal allowance for tax will increase to £11,500 from 5 April 2017. (It will be £11,000 for the 2016-7 tax year).
- The higher rate tax threshold will be £45,000 for 2017-8 (£43,000 for 2016-17).
- Class 2 National Insurance will be abolished from 6 April 2018.
- There will be a new ‘Lifetime ISA’ to help adults under the age of 40 save towards buying their first home or for their retirement.
- Capital gains tax rates will fall to 10% for basic rate tax payers and 20% for higher rate tax payers – but the old rates of 18 and 28% will continue to apply for the sale of residential property not qualifying as your personal private residence.
- Corporation tax rates will fall to 17% from 1 April 2020 (Current: 20%, 1 April 2017: 19%).
- There will be new £1,000 allowances for trading and property income from 5 April 2017.
A reminder of key changes announced previously
- Basic rate tax payers will have a £1,000 tax free savings allowance from April 2016. Higher rate tax payers will have a £500 allowance. Those paying the additional rate (income over £150,000) will not benefit from the allowance at all.
- The deduction of tax on interest at source by bank and building societies will cease from April 2016.
- ISAs will become more flexible – if you take money out, you can reinvest it within the same tax year without losing the tax free status.
- From 6 April 2016, employers with apprentices under the age of 25 will no longer be required to pay employers National Insurance contributions (NI) on earnings up to the upper earnings limit, for those employees.
- There will be a new dividend tax allowance of £5,000 per annum from 6 April 2016. Above that, there will be new rates of tax on dividends of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
- Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits if they pay tax at the higher rate – the changes will be phased in from April 2017.