Budget 2016 – Key points for small businesses

At 1.30pm on Wednesday 16 March, 2016, George Osborne delivered his eighth Budget as Chancellor of the Exchequer.

The overall headlines include the introduction of a sugar tax on soft drinks from 2017, extra funding for schools to have longer days and a downward revision of growth forecasts for the UK, but what did Budget 2016 bring for small businesses?

Here are the main points that affect business owners, both self-employed and limited company directors;

For businesses

• Corporation tax to be cut from the current 20%, to 17% by 2020.

• Class 2 National Insurance Contributions to be abolished for sole traders from April 2018. Move will save around 3 million self employed workers £130 per year.

• Annual threshold for small business rates relief to be raised from £6,000 to £15,000 Higher rate threshold also increased from £18,000 to £51,000. Chancellor estimates this means some 600,000 small businesses will pay no business rates at all from April 2017, with a further 250,000 businesses benefiting from a rates cut.

• Public sector employees to be prevented from using “personal service companies” to cut their tax liabilities.

• Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight 16 March, 2016.

• Closure of corporate tax loopholes to raise £9bn, and anti-tax avoidance and evasion measures to raise a further £12bn from big businesses by 2020.

For individuals

• Personal tax-free annual allowance to rise from £10,500 to £11,000 for 2016/17 tax year, and to increase to £11,500 for 2017/18.

• Threshold at which individuals begin paying the higher rate of tax to be raised from £42,385 to £43,000 in April 2016 and to £45,000 in April 2017.

• Capital Gains Tax (CGT) is being cut  from April 2016. The rate of Capital Gains Tax paid by higher rate taxpayers will be cut to 20%, from 28%, with the CGT rate for basic rate taxpayers falling to 10%, from 18%. However, residential property will not benefit from the new lower rates of CGT.

• Annual tax-free ISA limit to be increased to £20,000 from April 2017.

• Introduction of a new “Lifetime ISA” for the under-40s. For every £4 saved, the Government will add a further £1. People can save up to £4,000/yr until they reach 50 years of age.

• Fuel duty to be frozen.