Budget 2016

Wow, we weren’t expecting that!

The run-up to the Budget had led many to believe that this year’s event would be a relatively quiet affair and tax giveaways were certainly not on the agenda.  Hence, it came as something of a surprise when not only did the Chancellor announce a range of new initiatives, but also a number of tax cuts.

Perhaps the biggest bolt out of the blue is the significant reduction in the main rate of capital gains tax (down from 28% to 20%).  However, as always “the devil is in the detail” and with yet another blow to residential landlords it is now clear that individuals owning residential properties will not qualify for this new lower rate of capital gains tax.  We anticipate that this will further encourage the buy-to-let sector to transfer their residential property portfolios into a company structure, particularly as the Chancellor has announced yet another reduction in corporation tax rates (the rate will now be only 17% by 2020, which in historical terms is unbelievably low – some of us are old enough to remember when corporation tax rates were 52%!).

Other surprise announcements on capital gains tax were positive changes to Entrepreneurs’ Relief, particularly as many had feared a reduction, or even the abolition of this very valuable tax relief.

There were further welcome changes for small businesses, with an increased and permanent relief from business rates and a reduction in the Stamp Duty Land Tax cost of purchasing a commercial property.  A freezing of fuel duty and a very small increase in Insurance Premium Tax were also much better outcomes than many had feared.

An increase in the maximum amount that can be invested in ISAs was anticipated, but I don’t think anyone expected the threshold to be increased from £15,240 to £20,000.  An increase of 31% is somewhat mind-blowing when inflation is essentially zero.  The new Lifetime ISA that the Chancellor announced is a very interesting and welcome initiative and we can see many individuals using this as part of their overall investment and tax planning strategy – it’s just a shame that some of us are too old to take advantage of this new tax break!

There was also welcome news that despite the Chancellor having difficulty in balancing the books (those strong headwinds are almost a permanent feature of his speeches!), he reiterated his commitment to increase the income tax Personal Allowance to £12,500 and the higher rate income tax threshold to £50,000 by the end of this Parliament.

Naturally there had to be some bad news in this year’s Budget, particularly being so early in the 5 year parliamentary cycle, and the Chancellor’s main focus this year appeared to be on those of us with a sweet tooth – his new “sugar tax”.  However, it is not all bad as the new sugar tax doesn’t come in until 2018, which gives us two years to try and kick the habit!

Please click here to download a copy of our 2016/17 Tax & PAYE Tables.

Please click here if you would prefer to read and download our Budget 2016 highlights as a pdf.

Click on the headings below to read further information on the affects of today’s announcements:

Farming partner Rob Hitch has also summarised the important changes relevant to farmers in a special ‘Cows & Money’ Budget summary here

If you have any queries on the 2015 Budget please do not hesitate to contact one of our tax specialists on 01228 530913 or 01768 864466.

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