Chancellor George Osborne delivered his first coalition constraint-free Budget ‘for the next generation’ on March 16 2016, describing it as a solution ‘for the next generation’.
He declared the British economy ‘set to grow faster than any other major country’s,’ with his proposed measures enabling individuals and businesses to benefit from this predicted upturn.
However, downward global growth, sliding UK productivity forecasts and the looming EU referendum may impact on his – and the UK’s – confidence.
Budget Round Up
Income tax personal allowance rises to £11,500 while higher rate threshold increases to £45,000 from 2017. The National Minimum Wage will rise by 50p per hour in October, which will hit many employers hard, especially as they must also implement Workplace Pensions by 2018.
Class 2 National Insurance contributions cease in 2018, but state pension access will remain.
Lifetime ISA payments by under-40s to £4,000pa will attract a 25% state bonus. Savings are for first home purchases or withdrawal at 60. ISA ceilings will be £20,000.
Help to Save for qualifying households will yield a 50% government bonus after two years on monthly savings of up to £50 from 2018.
Inheritance Tax legislation will be introduced to ensure beneficiaries of owners downsizing or relinquishing properties are not disadvantaged when bequests take effect.
Corporation Tax drops to 19% in 2017, then 17% by April 2020. Participator loans and benefits tax leaps from 25% to 32.5% and restrictions on corporate loss relief and relief for interest expenses come into force.
Business Rates reforms will save many businesses £6,000pa from 2017 as relief doubles to £12,000– but local authorities will ultimately lose revenue as a result.
Capital Gains Tax will reduce at basic rate (18% to 10%) and higher rate (28% to 20%) – but not for residential property uplifts.
Investment-boosting Entrepreneurs’ Relief will apply 10% Capital Gains Tax to unlisted company share value increases, up to a £10m lifetime limit.
VAT rates remain static. Registration changes will free 2,000 businesses from liability. Overseas companies will pay VAT on UK trading to assist fair high street competition.
Stamp Duty Land Tax (SDLT) will not be payable on commercial properties purchases up to £150,000. Thereafter, SDLT will be 2% up to £250,000 then 5%. Rent paid under non-residential leases will incur a 1% SDLT charge when rent Net Present Value is above £150,000 and 2% where it is more than £5m.
Fuel duty increase proposals were abandoned, but the surprise Sugar Tax will net the Treasury £520m a year from 2018.
Alcohol duty is unchanged, handrolling tobacco is surcharged.
Insurance Premium Tax was increased by 0.5% to 10%. Air Passenger duty rises in line with RPI.
UK schools will all change status to academies by 2022, with funding processes to be reviewed.
Spotlight on the South West
Somerset will gain from the South West’s budget allocation of £3m for rail station improvement, £19m for community-led housing and a broadband enhancement grant.
Fuel duty stability will aid motorists in rural and city locations, and farmers’ profit-averaging period options will be welcome countywide.
Investment in flood defences has been promised, but Insurance Premium Tax will punish those living in affected areas.
South Somerset MP Marcus Fysh backs the Budget as ‘good news for young people, small businesses – and the South West’, predicting income tax reductions for nearly 55,000 constituents, fairer rural schools funding and revitalised high streets.
This Budget summary covers areas most relevant to individuals and business. For full Budget details, please see www.gov.uk/government/publications/budget-2016-documents/budget-2
Milsted Langdon’s expert team can advise anyone concerned about how the Budget might affect their lives and work and recommend action to mitigate undesired effects.
For more information, please contact us.