These are the key announcements from the budget as they affect our clients:
The tax-free personal allowance is being raised to £11,500.
The higher rate threshold will rise from £42,385 to £45,000 from April next year.
The abolition of Class 2 National Insurance contributions, saving £130 for self-employed workers from 2018.
CAPITAL GAINS TAX
The Chancellor said Capital Gains Tax would be cut from 28 per cent to 20 per cent, with the rate paid by basic rate taxpayers down from 18 per cent to 10 per cent.
The new rates will come into effect in three weeks’ time. The old rates will be kept in place for gains on residential property and the carried interest of some fund managers.
The 10 per cent rate for Entrepreneurs Relief will be widened to include shares in unlisted companies provided that they have been held for three years. We are assuming that this will probably be limited to trading companies – but this is not completely clear at the moment.
The widening differential between tax rates on capital gains and income will increase the attractiveness of trying to plan for capital growth in structuring investments.
The Chancellor has announced a new sugar levy on the soft drinks industry. OBR estimates levy will raise £520million.
Corporation Tax to reduce gradually down to 17 per cent by April 2020.
The Chancellor also announced that he is permanently raising the threshold for small business rate relief from £6,000 to a maximum of £15,000 and for the higher rate from £18,000 to £51,000.
He promised to simplify the administration of business rates, and from 2020, switch the uprating from the higher RPI to the lower CPI.
UK “micro-entrepreneurs” who sell services or rent out property will benefit from two new tax-free allowances each worth £1,000 a year. The new property is in addition to the rent-a-room scheme which continues – but could include renting roof space for solar panels etc.
The Chancellor announced a series of actions to tackle “tax avoidance and evasion totalling £12billion”, including moves to end the use of ‘personal service companies’ by public sector employees. IT contractors will be looking at these new rules carefully to see if they apply to them or provide an indication of what might be brought in in future.
SAVINGS & PENSIONS
The ISA limit will be increased to £20,000 a year for all savers, and lifetime ISAs will be introduced for young people.
From April 2017, under-40s will be able to open lifetime ISAs and save up to £4,000 each year.
Every £4 saved in these new ISAs will be topped up by £1 from the Government, so if savers put in £4,000, the Government will give them £1,000 every year until they reach the age of 50.
INSURANCE PREMIUM TAX
The Chancellor confirmed a 0.5 per cent increase in Insurance Premium Tax, saying the some of the money raised would be used to fund a ‘£700 million boost to our resilience and flood defences’.
Fuel duty frozen for the 6th year.
Duty on beer, cider, whisky and other spirits will also be frozen this year but all other alcohol duties will rise by inflation as planned.
Tobacco duty will rise by 2 per cent above inflation from 6pm tonight, with hand-rolling tobacco up by an additional 3 per cent.
The Chancellor announced a new sugar levy on the soft drinks industry.
COMMERCIAL STAMP DUTY
Mr Osborne announced reforms of commercial stamp duty similar to those introduced on residential property last year.
From midnight tonight, commercial properties will have a zero rate band on purchases up to £150,000, a 2 percent rate on the next £100,000 and a 5 per cent top rate above £250,000. There will also be a new 2 per cent rate for high-value leases with a net present value above £5million.
These reforms will raise £500 million a year but, while 9 per cent will pay more, more than 90 per cent are expected to see their tax bills cut or stay the same.