Key points from the Chancellor’s budget

 

Personal Tax

The personal allowance will increase from £11,000 (2016-2017) to £11,500 from 6 April 2017. The higher rate threshold is to increase from £43,00 (2016-2017) to £45,000 from 6 April 2017.

Property and trading allowances  – From April 2017 there will be a new £1,000 allowance for property income and also a £1,000 allowance for trading income. Individuals with property income or trading income within this allowance will no longer need to declare or pay tax, and they can choose to pay tax on the excess income over the allowance rather than calculate their actual profit.

Termination payments  – From April 2018, employment termination payments over £30,000 liable to income tax will also be subject to employers’ NICs.

Loans to participators  – The loans to participators (director loans) tax rate will be increased from 6 April 2016 to 32.5% (from 25%)  keeping it aligned with the higher rate of tax charged on dividend income.

Lifetime ISA and ISA limit  – A new Lifetime ISA will be available from April 2017 for adults aged under 40. There will be an annual contribution limit of £4,000 and savers will receive a 25% government bonus, i.e. £1,000 bonus for every £4,000 contributed. Funds, including the bonus, can be used to buy a first home at any time from 12 months after opening an account. They can be withdrawn tax free from age 60 for other purposes. The overall annual ISA subscription limit will be increased to £20,000 from 6 April 2017.

 

Capital Taxes

Capital gains tax  – The higher rate of capital gains tax (CGT) will be reduced from 28% to 20% and the lower rate will reduce from 18% to 10% with effect from 6 April 2016. The 28% and 18% rates will continue to apply to carried interests and to chargeable gains on residential property. 

Stamp duty land tax  – The extra 3% stamp duty land tax (SDLT) will apply to purchases of additional residential properties from 1 April 2016. Following consultation there will be no exemption from the higher rates for significant investors. Purchasers will have 36 months (rather than 18 months as originally proposed) to claim a refund of the higher rate if they buy a new main residence before disposing of their previous main residence. 

Non-residential SDLT  – The rates of SDLT on non-residential properties will be reformed from a slab to a banding system similar to that for residential properties. This takes effect from 17 March 2016 with transitional provisions for properties where contracts have already been exchanged. There will be a 0% rate up to £150,000, a 2% rate for the next £100,000, and a 5% rate above £250,000. A new 2% rate will apply to leasehold transactions with a net present value over £5 million.

 

BusinesTax

Corporation tax  – The corporation tax rate, which is currently 20% and due to fall to 19% in 2017, will be reduced to 17% from 1 April 2020. 

Corporation tax loss relief  – The current streaming rules will become more flexible. Losses arising on or after 1 April 2017 that are carried forward will be usable against profits from other income streams or the profits of other companies within a group. Also from 1 April 2017, companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. For groups, the £5 million allowance will apply to the group. 

Capital allowances on cars  – The 100% first year allowance (FYA) for businesses purchasing low emission cars will be extended for a further three years to April 2021. From April 2018 only cars with CO2 emissions of 50g/km will qualify for FYA (currently 75g/km). From the same date, the CO2 emission threshold for the main rate of capital allowances for cars will be reduced from 130g/km to 110g/km

Business rates   – From 1 April 2020 business rates in England will be uprated by reference to the CPI instead of the RPI. From 1 April 2017 small business rate relief (SBRR) will double and the SBRR threshold will be raised to rateable values of up to £12,000 tapering to £15,000. The government will aim to introduce more frequent revaluations of properties. 

Insurance premium tax (IPT)  – The standard rate of IPT will be increased from 9.5% to 10% from 1 October 2016. 

Soft drinks industry levy  – A new soft drinks industry levy will be payable by producers and importers of soft drinks that contain added sugar. The new levy will be implemented from April 2018.

VAT registration and deregistration   – The VAT registration threshold will increase from £82,000 to £83,000, and the deregistration threshold will rise from £80,000 to £81,000, from 1 April 2016.