- Limit at which people start paying tax to be raised to £11,000 from 6th April 2016 and £11,500 from 6th April 2017
- Higher rate tax threshold increased from £41,865 to £43,000 from 6th April 2016
- Higher rate tax threshold increased from £43,000 to £45,000 from 6th April 2017
TBOS COMMENT – With the personal allowance increasing it means more lower paid workers will not be taxed and should mean more money in your pocket each month. The £500 increase in the basic rate threshold will mean taxpayers will get £100 in their pocket assuming there is no change in their wages. Higher earners also will see the benefit due to the increase in the higher rate threshold.
CHANGES TO TAXATION FOR DIRECTORS
- From 6th April 2016, the dividend tax credit with be abolished and instead the first £5,000 on dividend income will be tax-free.
- After the allowance of £5,000, dividend income will be taxed at 7.5% (0%) for basic rate taxpayers, 32.5% (25%) for higher rate taxpayers and 38.1% (30.56%) for additional rate taxpayers. The figures in brackets are the current effective rates of tax for comparison.
- After 6th April 2016, any overdrawn directors loans not paid back within nine months of year end will now incur a Corporation Tax charge of 32.5% of the loan instead of the original 25%. This can still be reclaimed when the loan is repaid or waived
- Reduction in Capital Gains Tax from 6th April 2016 from 28% to 20% on higher rate and 18% to 10% on basic rate limits.
TBOS COMMENT – With the additional taxation of dividends this will mean that any shareholder originally taking a low salary and dividends up to the basic rate band and paying little or no personal tax, will now incur a tax of around £2,025 per annum. It is advised for Directors currently taking a dividend to speak to their personal tax accountant to review their remuneration in the 2016/17 tax year. The increase in taxation of overdrawn director’s loan accounts will also have an impact on company cash flow.
HELP FOR BUSINESS
- Corporation tax to be cut by 1% to 19% from 1st April 2017 and will continue to reduce the Corporation Tax rate to 17% by 1st April 2020.
- From 1st April 2017 Corporation tax loses can be offset against companies within a group
- Employment Allowances will increase to £3,000 from 6th April 2016
- From 1st April 2017 the small business rate relief will double from 50% to 100% with businesses with a ratable value of £12,000 or less not paying any rates.
TBOS COMMENT – The reduction in Corporation Tax will make the UK more attractive for companies from outside the UK to set up. The ability to offset corporation tax losses between companies within a group will help companies who may become trapped or unusable.
CHANGES TO CONTRACT WORKERS PAYMENTS
- Travel & Subsistence allowances for temporary and contract workers will be restricted from 6th April 2016. This will especially effect Umbrella company workers but workers using a Personal service Company may also be caught by this change in tax rules.
- From 6th April 2017, contract and temporary workers in the public sector will no longer be able to fall outside of IR35 and will automatically have to be paid PAYE and declared through RTI
TBOS COMMENT – The T&S allowance talk has been going on for some time and the impact on Umbrella companies and temporary/contract workers is yet to be seen. The consensus is that most contractors will lose their expense allowances and therefore receive a lower take home pay. The forthcoming changes to the public sector workers will also move workers to the private sector but this could be the next sector in the Chancellor’s future plans.
- From 1st April 2016, the National Living Wage of £7.20 for the over 25’s will be introduced
TBOS COMMENT – Good news is that the manufacturing, construction and services sectors are larger than the beginning of 2010. Sectors like aerospace have grown by 30%, car production have grown by 60%, scientific research and development have grown by 24.4% and architecture and engineering growing by 42.5% shows that the job market is improving which can only be good for the whole industry.
TRANSPORT AND INFRASTRUCTURE
- Announcement of the New HS3 Project to connect Leeds and Manchester and the greenlight on the London Crossrail 2 Project
- £50m allocated to Pothole Action Fund in 2016-17
- Extra funds to transform the M62 and improve road links to the North including A66 and A69
TBOS COMMENT – Good news for the rail, construction and engineering industry and may open up further opportunities for recruiters.
ENERGY AND THE ENVIRONMENT
- Government has pledged £700m towards improving the UK’s flood and resilience defenses
- Continued support and funds for offshore wind less and established renewable energy technologies till 2026
TBOS COMMENT – The investment in the renewable energy industry means there may be recruitment opportunities for recruiters.
- Based on the success of the Help to Buy ISA, the new Lifetime ISA will be launched from 6th April 2017 for any person under the age of 40. Savings up to £4,000 per year will receive a 25% top up for each pound invested and can be taken either at retirement or when the first home is purchased (up to property values of £450,000)
- Launch of Starter Homes Land Fund prospectus for local authorities to access £1.2bn of housing funding.
TBOS COMMENT – The support for new housing is good news for the construction industry and may mean recruitment opportunities are available for recruiters
FUEL , TOBACCO AND ALCOHOL… AND NOW SUGAR
- Fuel Duty has been frozen
- Beer, Cider, Wine, Scotch whisky and other spirits duty has been frozen
- Tobacco duty up 2% and 5% above inflation
- New sugar levy on manufacturers of soft drinks with sugar content above 5g per 100ml from April 2018
TBOS COMMENT – Although this sounds like good news for motorists (apparently saving the average driver £75 per annum) it doesn’t mean that petrol prices will not increase only that the tax will not rise. It is also good news for drinkers but not for smokers. The new sugar tax is yet to be clarified but will have an impact on the drinks in the supermarkets and the drinks in our bars and pubs.