With all the political grandstanding and scaremongering over the EU referendum, it was easy to forget that the Chancellor, George Osborne, had a Budget to deliver this week.
It was his fourth Budget statement in 12 months and, with businesses still reeling from the previous three, business support organisations were calling for some calm. The British Chambers of Commerce urged “a steady approach that gives businesses, individuals, and Government itself the time needed to work through existing commitments and reforms”.
This was echoed by Mike Cherry, policy director of the Federation of Small Businesses: “In the face of a number of emerging global and domestic pressures, small businesses are looking to the Chancellor to back them through what are set to be challenging times ahead.”
However, this was always going to be easier said than done. The Office for Budget Responsibility is expected to reduce its Budget surplus forecast for 2019-20, with weaker growth and lower tax revenues. If the Chancellor is to stick to his Budget deficit plans, he needs to find money from somewhere.
So what plans did the Chancellor lay out to keep his economic plan on track?
- Income tax: higher rate threshold to increase to £45,000 from April 2017.
- Personal tax-free allowance: increasing to £11,500 from April 2017.
- National Insurance: Class 2 NICs to be abolished for the self-employed from April 2018.
- VAT: registration threshold to increase to £83,000 from April 2016.
- Corporation tax: will fall to 17% by 2020.
- Capital Gains Tax: from April 2016 the main rate will be cut from 28% to 20% and the rate for basic rate tax payers will be cut from 18% to 10%. There will be an 8% surcharge on residential property and interest paid to asset managers.
- Digital Tax Accounts: the self-employed and landlords who keep their records digitally and who submit regular digital updates to HM Revenue & Customs will be able to opt to pay tax on a ‘pay-as-you-go’ basis from April 2018.
- Business rates: businesses with a rateable value up to £12,000 will pay no business rates from April 2017. There will be tapered rate relief for properties with rateable values between £12,000 and £15,000.
- Business rates: London will be able to retain 100% of all business rates collected to reform core services and invest in long-term growth in the capital. Similar schemes will be piloted in Greater Manchester and Liverpool.
- Stamp duty: new bands to be introduced for commercial properties with immediate effect. The commercial property stamp duty regime will be aligned with residential property stamp duty, which is paid on the proportion of the property’s value falling within each band. The portion of a property’s price up to £150,000 will attract a 0% charge, the portion of its price between £150,001 and £250,000 will attract a 2% charge and amounts over £250,000 will attract a 5% charge.
- Stamp duty: new 2% rate for leasehold rental transactions with a value over £5 million.
- Business losses: the amount of profit that can be offset by losses that have been carried forward will be restricted to 50% for profits in excess for £5 million from April 2017.
- National Minimum Wage: the hourly rates of NMW will increase from October 2016 to £6.95 per hour for 21 to 24-year olds; to £5.55 per hour for 18 to 20-year olds; to £4.00 per hour for 16 and 17-year olds and to £3.40 per hour for apprentices.
- New tax-free allowances: it will be possible to earn up to £1,000 per year from ‘occasional jobs’ without paying any tax. This includes income from selling goods you have made, providing services or relating to income from property you own (such as renting a driveway).
- Employee Shareholder Status: there will be a new lifetime limit of £100,000 on gains eligible for capital gains exemption through ESS for agreements entered into on or after 17 March 2016.
- SME access to finance: the Government has set out a £1bn commitment to support SMEs through the Business Bank. The first loans are expected in spring 2016. They have also confirmed the extension of the Enterprise Finance Guarantee programme until at least 2018.
- Insurance Premium Tax: increasing by 0.5% from 1 October 2016.
- Capital Allowances: the capital allowance main rate threshold for cars will be reduced to 110 grams of CO2 per kilometre and the First Year Allowance threshold will be reduced to 50 grams of CO2 per kilometre from April 2018.
- First Year Allowances: extended for a further three years until 2021 for businesses purchasing low-emission cars.
- Fuel duty: frozen for the 6th year running.
- Termination payments: employers will have to pay National Insurance Contributions on pay-offs such as termination pay-offs over £30,000 from April 2018 where tax is also due.
- ISA allowance: increasing to £20,000 per year from April 2017 (up from £15,240). There will also be a new Lifetime ISA which will allow savers under the age of 40 to save up to £4,000 per year. The Government will add a 25% bonus to the money saved.
- Climate Change Levy: increasing from April 2019 to replace the Carbon Reduction Commitment, which will be abolished after the 2018-19 compliance year.
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