Budget 2016 the main points for small businesses

Small businesses and self employed individuals should be pleased with the chancellor's Spring Budget 2016. Because from 2020, the level of Corporation Tax will be reduced to 17%, less than the previously stated 18%. Making working through a limited company still a very tax effeicient choice. Capital Gains Tax (CGT) will also be reduced to 20% from 28% for higher rate taxpayers and 10% from 18% at the basic rate taxpayers. And the VAT threshold rising to £83,000.

 Key Points for Small Businesses and the Self Employed:

• From the 2017/18 Tax Year, the tax free Personal Allowance will increase to £11,500 and the Higher Rate threshold will increase to £45,000. With government target of £12,500 by 2020. Currently it is £11,000 from this April 2016.
• From April 2020, Corporation Tax for UK Limited Companies will be reduced to 17%. Reduced annually from the current 20% level today.
• Capital Gains Tax is now immediately reduced from 28% to 20% for Higher Rate taxpayers and for Basic Rate taxpayers CGT is reduced from 18% to 10%. This is a drop in tax rates and will help individuals who want to invest in companies or sell assets. Unfortunately though, individuals who own residential properties will continue to pay 18% and 28%, this relief is not extend to them.
• Business Rates Relief threshold is to be increased from £6000 to £15,000 to help small businesses.
• Tax on a Director Loan will increase from 25% to 32.5% with Dividend Tax changes.
• From this April 2016 Dividends taken will only be tax free up to £5000 after which the tax rates are 7.5%, 32.5% and 38.1% (basic, higher, additional rates).
• VAT Registration threshold increases to £83,000 from April 2016.
• From April 2017, New Allowances of £1,000 per annum for property and trading income for very small traders and property landlords eg online trading.
• From 17 March 2016, New Stamp Duty rates introduced for commercial property. This will become up to £150,000 at 0%; between £150,000 and £250,000 at 2%; and over £250,000 at a flat 5%.
• From 17 March 2016, Leasehold properties will pay 2% Stamp Duty if the net present value of the transaction is more than £5 million and above.
• New Tax Avoidance measures to be introdued to stop individuals disguising income as loans and imposing national insurance on termination payments over £30,000 from April 2018.

Other key points are:

• Class 2 National Insurance to be stopped from April 2018, saving of £143 per annum.
• Insurance Premium Tax increased from 9.5% to 10% across all types of insurance premiums.
• A new 25% Top-up ISA for all under-forties who save with the Lifetime ISA. For every £4 that is saved the government will top-up by a £1, to the max value of £4,000 per annum.
• Tax Free Allowance for saving into ISAs has increased from £15,000 to £20,000.
• Reforms of Class 4 NIC so the self-employed pay enough towards state pension entitlement.
• The Annual Investment Allowance (AIA) increased to £200,000. Majority of business can claim AIA towards their investment in assets and stand to benefit from relief.
• New Pay as you go tax. From 2018, small businesses, self-employed, and landlords can elect to pay taxes on a pay-as-you-go basis. Which may help tax payers manage their cash flow better.
• Lifetime Pension Allowance will be reduced from £1.25 million to £1 million.
• Personal Savings Allowance is set at £1,000 for basic-rate taxpayers, £500 for higher rate taxpayers. But additional-rate taxpayers get zero personal saving allowance.

And finally other significant point were:

• From 17 March 2016, Entrepreneur's Relief to be extended to cover investment in unlisted companies. with condition that the shares must be held for more than three years.
• There is also greater loss-relief flexibility for companies from April 2017. Allowing many group companies to offset losses easily with lesser restrictions.
• First-year Allowance of 100% for low-emissions car owners; the car-emissions threshold has been reduced from 75gm/km to 50gm/km.
• More restrictions to offsetting profit with losses carried forward for companies earning profits of £5 million or more.
• The Main Rate of Capital allowances attached to the car-emissions threshold reduced to 110gm/km.
• Employee shareholder Status changes. Employees will receive a lifetime allowance of £100,000 on CGT so that gains of up to £100,000 are tax-free for employee-shareholder status employees.
• NIC Relief on employer-arranged pension advice will increase from £150 to £500
• Legislation to be introduced in Finance Bill 2016 to prevent offshore structures being used to avoid paying taxes on property development.
• Also there is a new Sugar Tax to be introduced in 2 years time.

In Conclusion
Overall, good for small businesses and individuals. Not so great for contractors and landlords.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Surbiton they are considered in the Industry to be experts accountants for small businesses. Helping and supporting business throughout the UK, they regularly help new and established businesses to succeed.

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