The Budget 2016

George Osborne delivered his 8th Budget speech to the House Of Commons yesterday. Our tax team spent the afternoon digesting the key points of the Budget 2016 and how they may affect our clients and contacts.

To view our detailed summary please click here  Shorts' Budget 2016 notes

Here are our initial thoughts on the key announcements:

• Capital Gains Tax is reducing from 28% to 20% (for Higher Rate taxpayers) and from 18% to 10% (for Basic Rate taxpayers) from 6 April. Gains on residential properties will not benefit from these reduced rates.
• Director shareholders who own more than 5% of a trading business will continue to qualify for Entrepreneurs’ Relief (ER) and the 10% rate of CGT on lifetime gains of £10m. However, external investors who subscribe for new shares in a trading business will also benefit from ER for the first time, providing they hold the shares for more than 3 years. The lifetime limit of £10m will apply to these individuals too. This is a welcome change, which will grant tax breaks to those providing equity finance to growing businesses.
• The corporation tax rate is reducing further than previously thought to 17% from April 2020.
• HMRC are looking to introduce measures to crack down on individuals that engage with Public Sector organisations via one person companies.
• Business Rates Relief will be extended for some small businesses.
• The personal allowance will increase to £11,500 from April 2017, and to £12,500 by the end of this Parliament.

SDLT on commercial property acquisitions will be taxed based on bandings, which brings it in line with the recent changes to residential property. A rate of 0% will apply to the first £150k, 2% to the next £100k and 5% thereafter.

• There is to be a significant consultation on the use of losses within a group. It is being proposed that losses in group companies could be offset against profits in other group companies, irrespective of the year in which the losses first arose. However, for large businesses with profits in excess of £5m, loss relief could be restricted to 50% of profits.

The Government has announced a Business Tax Road Map, which is essentially a blueprint for business tax policy in the future. There are a number of announcements within this document, which will no doubt lead to consultations in future. This is a useful document setting out in advance areas that HMRC will focus on. The key message is the government’s ongoing commitment to low corporate taxes to encourage enterprise and investment.

There is more detail within our Budget 2016 summary, and at our seminar on Friday 18th March. If you would like to attend our seminar at Chesterfield FCs Proact Stadium from 8am, the last few places are now available if you click here.