Whilst the headlines in this morning’s newspapers are all about the Chancellor’s new sugar tax, there were plenty of announcements in yesterday’s Budget that were pretty sweet for business owners. Here are the headlines:
1) Reduction in Corporation Tax
Currently at 20%, corporation tax will reduce to 19% in April 2017 and then down to 17% in April 2020.
2) Reduction in Capital Gains Tax also
Capital Gains Tax will be reduced from the current rate of 28% to 20% for higher rate taxpayers. Basic rate taxpayers will be paying 10% as of April 2016. Gains on the disposal of residential property (unless is it your primary residence) remain at the old rates.
These changes make approved employee share schemes even more attractive. If you’re looking to retain your key members of staff, have a chat to us about how these changes might make it more tax efficient for you to do so.
For businesses seeking investment, the extension of entrepreneurs relief for newly subscribed shares held 3 years from 6 April may also provide a useful opportunity to raise external capital.
3) A new Lifetime ISA
From April 2017, a new ISA will be introduced for the under-forties. This will have a £4,000 limit per year and, for every £4 saved, the Government will add £1. You can withdraw this money when you reach 60. Early withdrawals mean no bonus and a charge.
The Lifetime ISA can be used to purchase a first home and no penalty would apply. People who save a maximum of £4,000 towards a home deposit or retirement will get a £1,000 top-up from the state every year until they turn 50.
The normal ISA allowance will increase to £20,000.
4) Pensions – make the most of them while you can
There was speculation leading up to the Budget about what might happen to pensions. Whilst the introduction of the Lifetime ISA blurs the line between ISAs & pensions, the Chancellor stopped short of withdrawing the tax reliefs on pensions, for now at least.
Changes to the pensions advice allowance mean that people will now be able to dip into their pension pots to pay for pre-retirement financial advice. The Government also confirmed that it would ensure that the industry launches a Pensions Dashboard where an individual can review all their retirement savings all in one place by 2019.
The good news is that you don’t need to wait until 2019 to make this happen. If you’d like to do this now, get in touch with either Marc or Geoff from Wow’s Financial Planning Team.
5) Personal Allowance increase
The personal allowance will be increased to £11,500 from April 2017. There will also be an increase in the Higher Rate Threshold (40%), to £45,000 from April 2017, an increase from £42,385.
6) Class 2 National Insurance contributions abolished
The Government says that this will give a tax cut of more than £130 to three million self-employed workers from 2018.
7) Business Rates
The small business relief limit will be increased from £6,000 to a maximum of £15,000 exempting 600,000 firms from business rates. The higher rate limit will also be increased from 18,000 to £51,000.
8) Stamp Duty
Commercial stamp duty will have a 0% rate on purchases up to £150,000, 2% on the next £100,000 and 5% top rate above £250,000. This is effective from midnight tonight.
From 5th April 2016, there will be Stamp Duty on second homes – read more about this here.
9) Insurance premiums
Insurance premiums will be increased by 0.5%. This increase will be spent on flood defences.
10) Corporation Tax Loss Relief
From 1 April 2017, businesses will be able to use carried forward losses against profits from other sources of income or from other group companies.
11) Tax on overdrawn directors loan accounts
From 6 April 2016, the rate of tax chargeable on directors loans will increase from 25% to 32.5%. This makes it more important than ever to keep track of your drawings throughout the year to make sure you stay within the limits.
12) Will your business outperform the economy?
In November, it was predicted by the Office for Budget Responsibility that the economy would grow by 2.4% in 2016. It is now forecasting 2% growth.
We want to help your business thrive in 2016 (and grow by much more than the rest of the economy). With this in mind, we’ve shared a few blogs featuring Wow clients who are thriving right now. Check out: