Budget 2016
Budget 2016 at a glance
Chancellor George Osborne has delivered his Budget 2016, setting out the government’s latest plans for the nation’s finances.
Here are some of the key points:
- The personal tax allowance will go up to £11,500 from April 2017. The chancellor says this will give 31 million people a tax cut, and means people are paying over £1,000 less in income tax than in 2010.
- The higher rate tax threshold will rise to £45,000 from April 2017. The chancellor says this will take people out of the higher rate who should never have been covered by it.
- The government is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes. However, the government’s intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.
- From April 2018, Class 2 NICs for the self-employed will be abolished. The government says this represents an annual tax cut for 3.4 million self-employed people of £134 on average.
- From April 2018, termination payments over £30,000 which are subject to income tax will also be subject to employer National Insurance Contributions.
- The government has reviewed the discount rate used to set employer contributions to the unfunded public service pension schemes. The discount rate is being set at 2.8% and employers will pay higher contributions to the schemes from 2019-20 as a result.
- Tax on loans to directors and participators will be increased from 25% to 32.5% in April 2016, with effect for loans, advances and arrangements made on or after 6 April 2016.
- Tax-Free Childcare will be gradually rolled out to children under 12, in a “managed way”. Parents of the youngest children will be able to enter the scheme first and it will be open to all eligible parents by the end of 2017. The existing scheme, Employer-Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes.
- From April 2017, where the public sector engages an off-payroll worker through their own limited company, that body (or the recruiting agency if the public sector body engages through one) will become responsible for determining whether the worker is paying the right tax.
- The government will introduce a package of measures to tackle the current and historic use of disguised remuneration schemes, which are used to avoid income tax and NICs. Legislation will be included in Finance Bill 2016 which will prevent a relief in the existing legislation from applying where it is used as part of a tax avoidance scheme from 16 March 2016.
- To help the next generation to clearly view their pensions savings, the government will ensure the industry designs, funds and launches a pensions dashboard by 2019. This will mean an individual can view all their retirement savings in one place.
- Capital gains tax cut will be cut from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers from April 2016.
- From April 2017, the government will introduce two new £1,000 allowances for property and trading income. People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.
- The headline rate of corporation tax will fall from 20% to 17% by 2020.
- From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available for businesses that occupy a property with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.
- Fuel duty to be frozen for the sixth year in a row.
- The standard rate of Insurance Premium Tax (IPT) will be increased from 9.5% to 10%.
Budget 2016 – Highland Payroll Services