Well once again the Chancellor’s Budget was brimming full of personal and corporate tax changes to keep many an accountant on their toes. The Budget, along with the Autumn Statement, always ensures life is never dull and accountants, once again, need to evaluate the headlines (and the detail which follows) in order to advise their clients effectively.
We’ve heard this year’s Budget described as being one very much for the healthy and wealthy. It certainly seems that way when you consider the cuts to Disability benefit and the increase of the threshold at which people pay 40% tax.
With a number of the proposed measures, accountants do have 12 months to get to grips with them before they come into force. Who knows, we may even find the Tory back-benchers play their part in ensuring some end in a notable U-turn? But perhaps that’s wishful thinking.
Having looked over the Chancellor’s various announcements yesterday, we’ve jotted down those which we feel most affect accountants and the advice they give to clients.
Personal tax and savings
- The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017
- Tax-free personal allowance to rise to £11,500 in April 2017
- Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers. This is with effect from April 2016
- The Annual ISA limit to rise from £15,000 to £20,000
- A New “lifetime” ISA is being introduced for the under-40s, with the Government putting in £1 for every £4 saved
- A new state-backed savings scheme is being introduced for low-paid workers, worth up to £1,200 over four years
- The proposed additional 3% in stamp duty on the purchase of second homes and additional properties will be introduced in April. This additional tax will apply to the whole value of a property and is aimed at buy-to-let investors. In yesterday’s Budget the grace period (during which those who have an overlap between two properties can claim a refund on the higher rates) was, however, extended to 36 months. This has increased from the originally proposed 18 month period. The higher rate stamp duty will apply “equally to purchases by individuals and corporate investors”.
Business tax issues
- The headline rate of corporation tax (which is currently 20%) is to fall to 17% by 2020 – no doubt in time for the election
- For those of you with clients involved in the insurance industry, there will be a further 1% rise in insurance premium tax
- Be mindful that the Chancellor plans to raise £9bn by closing corporate tax loopholes and tax minimisation schemes
- There will be greater flexibility in the use of tax losses experienced by smaller companies, but it’s not clear yet what this entails
- The use of “personal service companies” by public sector employees to reduce tax liabilities is to end
- The commercial stamp duty 0% rate will apply to purchases up to £150,000, 2% on the next £100,000 and a 5% top rate above £250,000. A new 2% rate has been introduced for high-value leases with a net present value above £5m. This was effective from midnight yesterday.
As with announcements from previous Budgets and Autumn Statements, the devil is in the detail. Over the coming weeks accountants will need to monitor what exactly the Treasury is proposing. Only then will they be in a strong position to effectively advise and guide their clients.
But rest assured, no matter what the outcome, all your BTCSoftware tax and accounting products will be updated to reflect the latest changes as they come into force. If you have any questions though, do get in touch with our friendly team on Freephone: 0800 612 7650.
