George Osborne presented his April 2016 Budget as a “Budget for future generations”.
Here’s the 2016 Budget at a glance – the main points are summarised below.
- Personal allowance to increase to £11,500 in 2017/18
- Higher rate tax threshold to increase to £45,000 from 2017/18
- Class 2 NICs for self-employed abolished from April 2018
- Termination payments of more than £30,000 will be subject to employer NICs.
- All income from sporting testimonials and benefit matches for an employed sports person will be chargeable to tax and NICs. This treatment will be subject to a ‘one-off’ exemption of £100,000 of the income received from events held during a single testimonial or testimonial year.
- A new Property Allowance and Trading Allowance will exempt the first £1,000 of trading and first £1,000 of property income from having to be declared and no tax will be payable on these elements.
- VAT registration threshold will rise to £83,000 from 1 April 2016
- The current £150 income tax and national insurance relief for employer arranged pension advice to be increased to £500 from April 2017.
- Consideration is being given to limiting the range of benefits that attract income tax and NICs advantages as part of salary sacrifice schemes. However, the intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit.
- Corporation tax to be cut to 17% in 2020.
- Business rates to be cut for all properties in England from next year.
- Tax on all businesses paying rates will effectively be cut from April 2020 as these rates will index in line with CPI instead of the higher RPI.
- Insurance premium tax to increase to 10%. Revenue will be used to fund flood defense measures.
Capital Gains Tax
- Higher rate of CGT to be cut from 28% to 20% and the basic rate from 18% to 10% from April 2016 (excluding residential property).
- Entrepreneur’s relief extended and back dated to 18 March 2015.
- Introducing a lifetime limit of £100,000 on the CGT exempt gains that a person can make on the disposal of shares acquired under Employee Shareholder Agreements entered into after 16 March 2016.
Stamp Duty Land Tax
- Reform of Stamp Duty Land Tax from 17 March 2016 on non-residential property transactions into a sliced system. 0% on properties up to £150,000, 2% on properties from £150,001 to £250,000 and 5% on higher priced properties.
- Pensions Industry tasked with setting up a Pensions Dashboard by 2019 so individuals can easily keep track of all their pension plans in one place.
- Serious Ill Health Lump Sums will be allowed to be paid from crystalised funds as well as those that are not yet crystalised.
- A rule that forced dependants to take inherited pension funds as a lump sum at age 23 has been amended by the Government so that it falls in line with policy intentions.
- ISA limit to increase to £20,000 in April 2017.
- New Lifetime Isa will be introduced from 6th April 2017 for under 40’s with an annual limit of £4,000 along with a Government bonus of 25%. Contributions can continue into this plan until age 50. This can be used to help with the purchase of a first home after 12 months from setting up the plan subject to a property limit of £450,000. Or the funds can be withdrawn to provide for retirement from age 60. Further consideration will be given to whether funds can be accessed for any other purposes perhaps subject to a small 5% charge and removal of interest as well as the Government Bonus. Decisions will also need to be made on whether borrowing from the plan will be allowed, in line with the rules for US retirement plans.
- Help to Buy ISAs will continue to be available until November 2019. Those with existing Help to Buy ISAs can transfer these funds into the new Lifetime ISA in the 2017/18 tax year and still contribute up to the £4,000 limit in that year.
- New Help to Save scheme to be introduced to allow those on low incomes to save up to £50 per month along with a Government bonus of 50%.
- Consultation to be entered into on the possibility of introducing a Pension Advice Allowance. This will allow clients under 55 to take up to £500 tax free from their DC pension plan to help pay for retirement advice.
- The Money Advice Service is to be closed.
- Fuel Duty frozen
- Duty on beers, spirits and cider frozen. Other alcohol duties to rise in line with inflation.
- To tackle the health impact of smoking, tobacco duty escalator to continue to rise faster than inflation. To combat the lower duty currently on hand rolling tobacco, the duty on this will rise 3% faster than inflation.
- War pension payments to injured veterans will be excluded from the means testing for social care in England from April 2017
- To tackle childhood obesity, the introduction of a new incentive to encourage the soft drinks industry to reduce sugar content of drinks – commonly referred to as a ‘sugar tax’. The tax will be charged on volumes based on their sugar content. The revenue from this will provide funding for school sports.
- FCA to take over the oversight of Claims Management Companies
- And finally, a fourth lane for the M62 – hooray!