The budget was anticipated to be fairly staid this year, with the upcoming referendum and a slip back in the economy. After an initial expectation for there to be a big revelation on pensions, which the Chancellor changed his mind about, not much excitement was expected. However, there were a few big announcements and more importantly tax cuts!

The one announcement which has caught the media’s attention is the introduction of a sugar levy on sugary soft drinks. This will not be implemented until 2018, to give the industry chance to adjust (and for us to kick the sugar habit!). All the money raised will be spent on school sports.

Another big change is the introduction of The Lifetime ISA. Under 40’s can save up to £4,000 each year with a government contribution of £1 for every £4 saved, until the age of 50. This money could then be used for such as the purchase of a first home, or kept until retirement (from age 60), when it can be withdrawn tax free.  This could well be a model for pensions in the future, so we can look out for future changes in this arena next year.

One of the big themes in this year’s Budget was helping small businesses. Various measures have been introduced to do this, such as the abolishment of Class 2 National Insurance from April 2018, freezing of fuel duty and the changes in business rates relief.

Business rates relief for small businesses is permanently doubled to 100% and the threshold is increased from £6,000 to £15,000. The higher rate threshold has also been increased which will take a lot of small businesses out of the higher rate.

Also on property, the changes in Stamp Duty Land Tax for commercial properties will see a saving for those buying property under £1.05m. The new rates will be:

  • £0 and £150,000 – 0%
  • £150,001 and £250,000 – 2%
  • Above £250,000 – 5%

Capital Gains tax rates see another big change, which are likely to herald further changes in years to come. Rates are cut by 8 percentage points from April 2016, but not on residential property, another hit for landlords. This reduces the rates from 18% to 10% for basic rate tax payers and 28% to 20% for higher rate tax payers. This is very welcome indeed for certain businesses who fall short of the requirements for Entrepreneurs Relief, such as farmers selling only part of their farm. The ability to restructure without a prohibitive tax cost now exists.

The use of corporation tax losses will be more flexible, with losses incurred after 1 April 2017 being available to offset against profits from other income streams or other companies in the group. This allows better planning, and potentially creates additional funds for investment in the future.

Loans to participators: Any loans from your own company will now be taxed at 32.5% instead of 25%, from April 2016. This reflects the increase in dividend tax announced at the end of last year, levelling the field again.

Other announcements

  • Personal allowances will rise again to £11,500, as will the higher rate threshold to £45,000. It is still the government’s aim to increase these to £12,500 and £50,000 respectively by the end of parliament.
  • ISA Limit increased to £20,000
  • Stamp Duty Land Tax on second or buy to let homes will be 3 percentage points higher from April 2016, as previously announced.

Changes in allowances and tax rates

2016/17 2017/18
Personal allowance £11,000 £11,500
Higher Rate threshold £43,000 £45,000
ISA limit £15,240 £20,000
Corporation tax rate 20% 19% To be 17% by 2020
Capital gains tax – basic 10% 10% (18% in 2015/16)
Capital gains tax – higher 20% 20% (28% in 2015/16
VAT registration threshold From April 2016 £83,000