'A little nonsense now and then is relished by the wisest men'
18 March 2016
Willy Wonka (Gene Wilder) - 1971
Wise words from the fictional confectioner, played by Wilder in the 1971 hit film ‘Willy Wonka & The Chocolate Factory’, but would he see the sense in a sugar tax, designed to cut the amount of added sugar in soft drinks? As his entire world was based on a constant supply of sugar, we think it would take some time for this piece of wisdom to sink in. You’ll have been hard pressed not to have seen or heard about just such a tax, as this was one of the announcements made by George Osborne in the 2016 Budget this week.
Here at Springfords, we’re more than happy with any move that makes Britain healthier, but in his eighth Budget speech, which lasted just over an hour, the Chancellor also spoke a lot about making Britain wealthier too. In a Budget where the message was ‘act now, so we don’t pay later’, what else did the Government outline? We’ll be taking a look at the main tax issues in more detail over the coming weeks, and, as with all tax changes, the devil is in the detail, but here’s our at-a-glance list of the highlights from the 2016 Budget:
- Capital gains tax rates will drop to 10% and 20% (down from 18% and 28%) from 6 April 2016, except on sales of residential property, which will attract an 8% supplement, so that any gains are effectively taxed at the ‘old’ rates
- The rate of corporation tax will be reduced further, down to 17% by 1 April 2020
- Class 2 national insurance (which is normally paid by the self-employed) will be abolished from 6 April 2018
- The VAT registration threshold will increase to £83,000 from 1 April 201
- The annual subscription limit for ISAs will increase to £20,000 from 6 April 2017
- Lifetime ISAs’ (LISAs) for the under 40s will be introduced from 6 April 2017, into which a maximum of £4,000 can be invested each year. The Government will contribute £1 for every £4 invested up to the age of 50, and no tax will be payable on income or growth within the LISA or on withdrawal. The LISA can be used to help buy a home, or to fund your retirement, but on withdrawal before the age of 60 the Government top up is withdrawn and a 5% charge will apply
- The tax payable by a close company on certain outstanding loan balances that remain after the company’s year end (including directors’ overdrawn loan accounts) will increase from 25% to 32.5%, for loans made on or after 6 April 2016
- A £1,000 allowance will be available for individuals with trading or rental income from 6 April 2017 so that small amounts of income generated from these activities won’t be taxable
- The Annual Investment Allowance (AIA) for plant and machinery purchased by a business will remain at £200,000 per year for the lifetime of the current Parliament
- Entrepreneurs’ Relief (ER) will be available on shares in unlisted companies subscribed for on or after 17 March 2016, provided they are held for at least three years from 6 April 2016. Gains will be taxed at 10%, with a lifetime relief limit of £10 million, and it would appear that such investors may no longer need to be an officer or employee or own at least 5% of the company
- From 1 April 2017, more flexibility will be allowed when using losses carried forward by companies (and groups of companies), to allow losses to be set against other sources of income, although claims will be restricted where corporate profits exceed £5 million
- The tax free personal allowance will increase to £11,500 for 2017-18 and the point at which higher rate tax becomes payable will rise to £45,000 from 6 April 2017
Despite the upcoming sugar tax, the 2016 Budget was still surprisingly sweet. The reduction in the capital gains tax rates is a welcome change, and coupled with the extension of ER, will result in reduced capital gains tax liabilities for most. The corporation tax rate cuts, the abolition of class 2 national insurance and AIA levels being held will be well received by businesses. There are, of course, a couple of sour notes to offset all of that sweetness – the increase in the rate of tax payable on directors’ loans and the corporate loss restrictions.
Does the 2016 Budget give you a sugar rush? Will you be able to take advantage of some of the sweet ideas on offer? We’d like you to benefit from being in that group of ‘wisest men’ so, if you have any questions on how the 2016 Budget affects you, just get in touch with your usual Springfords contact, and keep an eye on our website and social media pages for future updates.
This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.