Budget 2016: what it means for your business and finances
Chancellor George Osborne billed it as a ‘Budget for the next generation’, but he might equally have called it a lifeline for small businesses.
After outlining the state of Britain’s economy, he announced a raft of measures that will put a spring in the step of small business owners across the UK.
Good news for small businesses
Most significantly, Corporation Tax was slashed still further, from 20% to 17%, allowing firms of all sizes to keep more of their profits. Bricks-and-mortar companies were also given a boost by a major reform to Small Business Rate Relief, which will rise from £6k to £15k, taking an estimated 600,000 businesses out of business rates altogether.
Similarly good news was announced for most businesses buying commercial property. New Stamp Duty levies will see 90% of businesses paying less (or the same) duty on property acquisition, with 9% paying more.
The Chancellor also reassured small businesses that the playing field would become more level for firms facing competition from major corporations and overseas internet retailers. A clampdown on tax loopholes for big companies will see the a cap of 50% imposed on the losses that can be offset against tax – but only on firms with profits of £5m or more. Additionally, multinationals that borrow in the UK and then offset the payments against tax will see that interest deductibility capped at 30%.
Overall, this raft of reforms are projected to raise £9bn from large firms, which will be used to give additional help to smaller companies.
Help for sole traders
There was good news for the self-employed too. Class II National Insurance payments will be abolished from 2018, giving entrepreneurs an effective tax cut of £130 per year.
Bonuses for savers and workers
Savers’ eyes will also light up when they learn that the ISA saving limit will be raised from just over £15k to £20k. More innovatively, the Chancellor introduced a new Lifetime ISA designed to help people save for their first home or their retirement. You will be able to save up to £4k per year and the Government will give you £1 for every £4 you save, meaning a bonus of up to £1k per year for savers up to the age of 50. In addition, the personal tax-free allowance will rise to £11,500 from April 2017, with the higher rate threshold to go up to £45k.
Finally, the headline rate of Capital Gains Tax will drop from 28% to 20%, with the lower rate falling from 18% to 10%. However, there will be an 8 percentage point surcharge to be paid on residential property and carried interest.
Of course, no Budget would be complete without a few tweaks to the so-called sin taxes. Duty on beer, cider and whisky will be frozen with other duties to rise with inflation. There’ll also be a sugar tax on the drinks industry in two years’ time.
So if you’ve done well from this year’s budget, raise a glass of beer or cider, or treat yourself to a sugary drink before the price hike takes effect. And if you’d like to discuss ways of making sure your business and your personal finances draw the maximum benefit from the new measures, give one of THP’s accountants a call – we’d be delighted to help you.