The Chancellor delivered his budget with a few surprises, both good and bad. There were a number of personal and business tax measures that have been affected and a brief overview is outlined here.
Capital gains tax rates will be reduced from 28% to 18% for higher rate taxpayer and from 18% to 10% for basic rate tax payers. These new rates will not apply for sale of residential property. The rate applicable to companies owning residential property is not yet clear.
Class 2 national insurance contributions will be abolished from April 2018.
Corporation tax rates will be reduced from 20% to 18% in 2017 and then to 17% by 2020.
Director’s loan account balances that are overdrawn incur a 25% tax charge by the company which is repaid once the loan is repaid. This rate is to be increased to 32.5% from 6 April 2016. Balances should be looked at closely.
Hobby traders and amateur landlords will have a new £1,000 allowance. Individuals with property income or trading income below £1,000 will not need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance.
Personal allowances are set to rise to £11,000 from April 2016 and then to £11,500 from April 2017. The 40% higher rate tax threshold will be increased to £45,000 from April 2017.
Second properties purchased will pay the additional 3% stamp duty. However, if the purchaser replaces their only or main residence within 3 years, they are able to claim back the additional stamp duty paid.
Small and micro businesses may not have to pay business rates at all. The threshold relief for business rates will rise from £6,000 to £15,000.
Stamp Duty on commercial property will move to a “slice” system like that of residential property.
Termination payments in excess of £30,000 will be liable to employers national insurance contributions as well as income tax.
The ISA limit will be increased to £20,000 from April 2017. A new lifetime ISA for those under 40 will be introduced. They can save up to £4,000 per year and the government will pay a 25% bonus for every £1 they put in. Contributions can be made up to the age of 50. Funds can be withdrawn at any time to fund the purchase of a home (under £450,000) or from the age of 60 to use in retirement.
A £12 billion anti-tax avoidance package was announced.
If you would like to discuss any of these points in further detail or how they may affect you, please do contact Chantal or Matthew at Champ Consultants on 01883 349300
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