The Budget 2016 – 16 March 2016 Tax Measures

Business Taxes

Corporation tax.  Reduced to 17% from 2020.

Petroleum Revenue Tax.  To be effectively abolished by reduction to 0% rate.  Supplementary Charge to be reduced from 20% to 10%.

Royalty withholding tax.  Additional obligations to deduct income tax at source from royalties paid to non-resident persons where arrangements exploit the UK’s double taxation agreement.

OECD anti-avoidance measures to be introduced for hybrid mismatch outcomes and limiting interest deductions.

Business losses.  For losses incurred on or after 1 April 2017, businesses will be able to use carried forward losses against profits from other income streams or from other companies within a group.

Sugar levy to be introduced on soft drink companies from 2018.

Class 2 National Insurance contributions to be abolished from 2018.

VCT, EIS and SEIS.. From 6 April 2016 energy generation activities (including the production of gas or other fuel) will be excluded from the tax-advantaged venture capital schemes.

Travel expenses.  From 6 April tax relief for home to work travel and subsistence expenses for workers engaged through an employment intermediary, such as a personal service company will be restricted.

Farmers.  From April farmers will be able to average their profits for tax over two or five years.

Loans to participators.  The rate of tax charged on loans to participators and other arrangements (currently 25%) is being specifically linked to the dividend upper rate, which will be 32.5% from 6 April 2016.  Loans made by close companies to trustees of charitable trusts, which are applied for charitable purposes, are exempted from the loans to participators tax charge.

Furnished lettings.  The 10% annual wear and tear allowance is abolished and deduction for the replacement of furnishings is introduced, for expenditure on furniture, furnishings and appliances.

Small business rates.  Small business rates relief is doubled from 50% to 100% from April 2017.

Terminal payments.  From April 2018 termination payments over £30,000 will be subject to employers National Insurance contributions (as well as, as now) taxed as income.

Personal Tax

Main personal allowances

£11,000 for 2016-2017, £11,500 for 2017/18   20% band £1 – £43,000 for 2016/ 2017.

40% band £43,000 – £150,000 for 2016 – 2017.  45,000 for 2017/18.

45% £150,000+

Personal savings.  From 6 April 2016 a personal savings allowance (PSA) will be introduced, exempting the first £1000 of savings income for basic rate taxpayers, £500 for higher rate taxpayers and nil for additional rate payers.

Dividend tax.  Individuals will pay no tax on the first £5,000 of dividend income. The rates of income tax on dividends received above the allowance will be changed to:  7.5% for dividends taxed in the basic rate band  32.5% for dividends taxed in the higher rate band  38.1% for dividends taxed in the additional rate band.

Lifetime ISA.  From 1917 an additional annual ISA allowance of £4000 is proposed, to which the Government will add 25%, thus increasing a £4000 contribution to £5000.  This will be limited to those between 18 and 40.  Ordinary ISA allowance will be increased from £15,000 to £20,000 from April 2017

Capital Gains Tax

From 6 April 2016, 18% rate of CGT to 10% and the 28% rate of CGT to 20% for chargeable gains, except in relation to the disposal of residential property (that do not qualify for private residence relief), and carried interest.

10% rate of CGT to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued from17 March 2016, and held for a period of at least three years starting from 6 April 2016

VAT

Changes to VAT to prevent online sellers supplying consumers with goods stored in the UK to the detriment of UK suppliers.

Fuel duty.  Continues to be frozen.

Alcohol duty.  Cider, beer and spirits duty frozen.  Others increase by inflation.

Insurance premium tax.  Is raised from 9.5% to 10%.

Inheritance Tax

Deemed domicile.  Non-domiciled individuals who have been resident in the UK for 15 out of 29 years will be deemed domiciled.  Anyone born in the UK with a UK domicile at birth and who later acquires a domicile of choice elsewhere, will be deemed to be UK domiciled if resident in the UK in at least one of the previous two tax years.

SDLT

Commercial property.  From 17 March 2016, SDLT will be charged at each rate on the portion of the purchase price which falls within each rate band. The new rates and thresholds for freehold purchases and leases premiums are:

£0 – £150,0000%
£150,001 – £250,0002%
£250,000 +5%

For further information, please contact Richard Sowler at rsowler@setfords.co.uk or by telephone on 01624 673978.