Small businesses, employers and buy to let landlords have been hit with a raft of changes over the last few years which have either made their jobs harder or increased the tax they pay. These include workplace pensions, restrictions on tax relief for landlords, the removal of tax relief on goodwill on incorporation, the National Living Wage, digital tax accounts, and the dividend tax. On Wednesday 16 March 2016, the Chancellor George Osborne delivered his Budget and did not add to this burden – too much! We have reviewed the announcements and identified the following which will affect our core client base, namely small businesses.
The personal allowance threshold is due to increase to £11,000 from 6 April 2016 and will then increase to £11,500 from April 2017. Also, the 40% tax rate is reached in the 2016-17 tax year when income is £43,000, this is due to increase to £45,000 for 2017-18.
The current rate of corporation tax is 20%. This will fall to 19% from 1 April 2017 and to 17% from 1 April 2020.
Small Business Rates
The annual threshold for small business rates relief is to be raised from £6,000 to a maximum of £15,000, which means that thousands of small businesses will no longer pay any business rates at all. This is a permanent cut and replaces the temporary rates relief.
Class 2 National Insurance (NI) will be abolished from April 2018. Class 2 NI is currently £2.80 p/w and is paid by the self employed. There is a contributory element which counts towards the State Pension and other benefits, and this will be transferred to a reformed class 4 NI.
The VAT registration threshold will increase from £82,000 to £83,000 from April 2016.
Capital Gains Tax
The current rates of Capital Gains Tax are 18% for a basic rate taxpayer and 28% for a higher rate taxpayer. From 6 April 2016, the 18% and 28% rates will be reduced to 10% and 20% respectively. However, gains on the sale of residential property will specifically be excluded from the new reduced rates.
Commercial Stamp Duty
Commercial stamp duty will be overhauled with the introduction of a 0% rate on purchases up to £150k, a 2% rate on the next £100k and a 5% top rate above £250k.
Loans to Participators
The rate of tax payable by a close company when it makes a loan to a participator on or after 6 April 2016 will increase from 25% to 32.5%. This reflects the 7.5% dividend tax which is effective from the same date.
HMRC is to offer support seven days a week in a bid to improve customer service. The tax office will extend its telephone opening hours and recruit 800 new call centre staff by 2017 in a bid to reduce call waiting times.