One of the main themes of the Chancellor’s March 2016 Budget was to ensure that the next generation inherits a strong economy, is better educated, and grow up fit and healthy. His proposed “sugar tax” on the soft drinks industry will be used to fund longer school days for those that want to offer their pupils a wider range of activities, including extra sport.
He again stressed his prudence in concentrating on debt repayment, there will be further changes affecting savers and he hinted that there could be yet further changes to pensions, but not for the time being.
Before we take a look at the announcements within the Budget that may apply to you and your organisation, here’s a quick reminder of the upcoming key dates for your tax diary.
|Corporation tax for year to 30/06/2015|
|2016/17 Tax year begins|
|Final RTI FPS due by this date. Indicate that this is Final Submission for the Tax Year.|
|PAYE & NIC deductions and CIS return and tax for month to 05/04/2016 (due 22nd April if you pay electronically)|
|Corporation tax for year to 31/07/2015|
|PAYE & NIC deductions and CIS return and tax for month to 05/05/2016 (due 22nd May if you pay electronically)|
Personal Allowances – The basic personal allowance for 2016/17 will be £11,000, increasing to £11,500 for 2017/18.
Income Tax Bands – The 20% basic rate band for 2016/17 will be £32,000 and £33,500 for 2017/18 meaning that you will pay 40% tax if your taxable income exceeds £43,000 for 2016/17 and the threshold will be £45,000 for 2017/18. The 45% top rate continues to apply to taxable income over £150,000 for 2016/17.
Further Changes to ISAs – The current £15,240 ISA limit is frozen for 2016/17 and the Junior ISA limit remains at £4,080. The ISA allowances will increase to £20,000 from 6th April 2017 when there will also be a new “Lifetime ISA” account where investors aged between 18 and 40 who save up to £4,000 a year will have 25% (up to £1,000) added by the government. Those who have been saving in the new “Help to Buy” ISA will be able to transfer their savings to this new account and use the savings to help them buy their first home or to provide an additional pension.
Pensions Allowances Reduced – From 6th April 2016 the pension fund lifetime allowance will be reduced from £1.25million to £1million. Those with income in excess of £150,000 will have the normal £40,000 annual allowance reduced by £1 for every £2 over £150,000.
£1,000 Savings Income Tax Free 2016/17 – From April 2016, a tax-free allowance of £1,000 or (£500 for higher rate taxpayers) will be introduced for the interest that people earn on savings.
New Dividend Rules Start 6th April 2016 – In the Summer 2015 Budget it was announced that there would be a £5,000 tax free dividend allowance from 6th April 2016 and that once used the rate of tax on dividend income would increase by 7.5%. Basic rate taxpayers will pay 7.5% tax on dividend income, higher rate taxpayers 32.5% and additional rate taxpayers 38.1%. Also, from 6th April, dividends will no longer carry a 10% notional credit.
32.5% Tax On Loans To Participators From 6th April 2016 – where a “close” company controlled by 5 or fewer shareholders makes a loan to one of those persons the tax the company is required to pay to HMRC increases from 25% to 32.5% in line with the dividend rate for higher rate taxpayers.
Capital Tax Rates – A reduction in the rate of capital gain tax from 18% to 10% for basic rate taxpayers and from 28% to 20% for higher rate taxpayers. The 18% and 28% rates remain for disposals of residential property.
Further Changes To CGT Entrepreneurs’ Relief – ER will be extended to external investors in unlisted companies at a rate of 10% of CGT to gains accruing on the disposal of ordinary shares held by individuals. These shares must be subscribed for by the claimant and acquired for new consideration on or after 17th March 2016 and held for a period of at least three years starting from 6th April with a lifetime cap of £10million.
Lower Corporation Tax Rates – A single rate of 20% has applied since April 2015 though the 2015 Summer Budget announced that this would reduce to 19% in April 2017. It has now been announced that it will be reduced the 17% from 1st April 2020.
£1,000 Tax Free For “Micro-Entrepreneurs” – From April 2017, new allowances for the first £1,000 of trading income and property income will be introduced. Income below this level will no longer need to declare or pay income tax on that income and those with income above the allowance will benefit by deducting the relevant allowance from their gross income. This appears to be aimed at people starting small business on E-Bay and renting on Airbnb.
New Corporate Tax Loss Rules – For losses incurred on or after 1st April 2017, companies will be able to use carried forward losses against profits from other income streams or from other companies within a group. However, large companies with profits in excess of £5million will only be allowed to offset brought forward losses against 505% of the amount of profit in each future period.
Interest Relief Restricted For Multi-National Companies – From 1st April 2017, to restrict profit sharing by multi-nationals, the UK will be introducing a Fixed Ratio Rule limiting corporation tax deductions for net interest expense to 30% of a group’s UK earnings before interest, tax, depreciation and amortisation (EBITDA) in line with rules that exist in several other countries addressing profit-shifting through interest charges. This restriction will not apply where the net UK interest expense is less than £2million.
SDLT Changes – On and after 17th March 2016, Stamp Duty Land Tax (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:
|Purchase Price||SDLT rate, cumulative|
|Up to £150,000||NIL NIL|
|£150,001 – £250,000||2% £2,000|
|£250,001 and over||5% (No maximum)|
Tax Relief On Small Donations To Charity Increased To £8,000 – The Gift Aid Small Donations Scheme (GASDS) allows charities to treat small donations as if Gift Aided. From 6th April 2016, the maximum annual donation amount which can be claimed through GASDS will increased from £5,000 – £8,000 allowing charities and Community Amateur Sports Clubs to claim Gift Aid style top-ups of up to £2,000 a year.
VAT Registration Limit £83,000 – An increase of £1,000 applies from 1st April 2016. De-registration also increased by £1,000 to £81,000.
To discuss how these changes affect you and your business and how summ.it can support you, contact our Accounts team via firstname.lastname@example.org