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23.03.2016 | written by Dave Hazlehurst

2016 Budget Breakdown

Business Tax

  •            Corporation Tax Rate Reduction

The main rate of corporation tax will be reduced by a further 1% to 17% from 1 April 2020.  This effectively means that the previously announced 18% will not come into effect.

  •            Loss Relief

Losses made after 1 April 2017 can be carried forward against profits from other incomes streams (previously only profits of the same trade).  If profits exceed £5m then only 50% of the profits can be offset.

  •           Tax Deductible Interest Restrictions

A fixed rate rule limiting Corporation Tax deductions for interest will be introduced from 1 April 2017.  Tax deductible interest expenses will generally be limited to 30% of UK earnings before interest, tax, depreciation and amortisation.

  •            Loan to participators (s455)

The rate of tax paid on loans to participators in a close company will increase from 25% to 32.5% from 6 April 2016.  This aligns the rate of tax payable with the main rate of tax payable on dividends.

Personal Tax

  •           The rate of capital gains tax is being reduced by 8% from 6 April 2016.  This is now 20% for a higher rate taxpayer and 10% for a basic rate taxpayer.  The exceptions to this are gains accruing on residential property and carried interest.
  •            An extension to Entrepreneurs Relief was announced on the disposal of qualifying shares by qualifying individuals (not including officers or employees).  The shares must:

o   Be newly issues

o   Be in an unlisted trading company

o   Held for three years and issued after 17 March 2016

  •            From April 2016 new allowances for the first £1,000 of trading income and first £1,000 of property income will be introduced.  This will be tax free.
  •           The rules on termination payments are going to be tightened and aligned with National Insurance.  Any payments in lieu of notice will become taxable as earnings and an termination payments that exceed £30K will suffer employers NI.
  •            A new lifetime ISA will be introduced from April 2017 so individuals under the age of 40 can save up to £4,000 each year which will be topped up at the end of each tax year with a 25% bonus from the government.  The money saved can be used to buy a first home worth up to £450,000 or can be withdrawn from the age of 60.  This limit will form part of the new £20,000 ISA limit.  This can be withdrawn for other reasons but the government bonus will need to repaid and a 5% charges.  A consultation document will be published soon to discuss allowing these funds for other specific life events without the additional charge.

Stamp Duty

  •            SDLT rates on non-residential property have been overhauled meaning that the old ‘slab’ system is replaced with a slice system like that now on residential property.  Properties up to £150,000 will be charges 0%, the next £100,000 at 2% and the remainder at 5%
  •            The previously announced additional 3% will apply to additional residential properties from 1 April 2016.  Following consultation, purchasers will not incur the additional charge of they replace a main residence which has been sold within 36 months (rather than the originally proposed 18 months).  In addition there is no specific exemption for companies which make significant investment in residential property as had previously been proposed in the consultation.  The higher rates will apply to all acquisitions made other than by individuals.

 

 

 

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