This is a very brief summary of Budget announcements of most relevance to entrepreneurs. As always, the Chancellor came up with various headline policies in his speech but there will be a great deal of important detail hidden away in the HMRC press releases and this will emerge over time.
Tax free allowance from 5 April 2016 £11,000
Tax free allowance from 5 April 2017 £11,500
20% Tax band from 5 April 2016 (next) £32,000
20% Tax band from 5 April 2017 (next) £33,500
These increases in both the personal allowance and increase in the Higher Rate Tax Threshold amount to a welcome tax cut.
Following a lot of publicity and debate over multinational companies avoiding tax in the UK, there are a number of measures to tackle that, including withholding tax on royalty payments to international subsidiaries. These are being called Starbucks Taxes. However, these measures are aimed at large businesses.
Corporation Tax Rates – the current rate of Corporation Tax is 20% and this will be gradually reduced to 17% over the years to 2020. This encourages businesses to retain profits and invest in the business. It also encourages entrepreneurs to operate through companies rather than be self-employed.
Stamp Duty Land Tax for commercial property will be reformed to result in tax assessed on a sliding scale like residential property instead of a step jump system. This will typically save tax for smaller businesses who buy their offices.
Business rate relief has again been increased for smaller businesses.
Fuel duty has been frozen for all, but this will particularly help small businesses that do a lot of mileage.
For the Self-employed, class 2 National Insurance Contributions will be abolished from April 2018. However, this only represents about £100pa.
Capital Gains Tax
Surprisingly, the Chancellor has decided to reduce the rates of Capital Gains Tax from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers from 5 April 2016. However, these changes do not apply to residential property not qualifying for private residence relief. Again, Mr Osbourne is having another dig at Buy to Let landlords. Whilst the rates of tax will be reduced, the tax take may well increase as asset holders are encouraged to rotate and dispose of assets without being discouraged by tax. This is good for business and the economy generally.
Take advice from a good accountant if you wish to take advantage of tax changes.