18 Mar 18.03.2016 Budget Highlights
18.03.2016 Budget Highlights
A cut in the main rates of capital gains tax from 2016/17 to 20% for higher and additional rate taxpayers and 10% for other taxpayers. However, the existing rates will continue for gains on residential property and carried interests.
An increase in the personal allowance for 2017/18 to £11,500 and the higher rate threshold to £45,000.
An extension of entrepreneurs’ relief to cover long term external investors in unlisted companies.
Two new £1,000 tax allowances for property income and trading income, starting in April 2017.
A cut in the corporation tax rate to 17% in 2020 and greater exibility in the use of tax losses by smaller companies.
A restructuring of stamp duty land tax on commercial properties.
A major revamp of business rates, permanently doubling the small business rate relief.
The abolition of Class 2 National Insurance contributions for the self-employed from 6 April 2018.
Income tax and National Insurance contributions
The personal allowance will increase to £11,500 and the higher rate threshold will rise to £45,000 for 2017/18. The National Insurance contribution (NIC) upper earnings limit will also increase to remain aligned with the higher rate threshold.
Property and trading allowances
From April 2017 there will be a new £1,000 allowance for property income and also a £1,000 allowance for trading income. Individuals with property income or trading income within this allowance will no longer need to declare or pay tax, and they can choose to pay tax on the excess income over the allowance rather than calculate their actual profit.
Restriction on landlords’ interest relief
The phased restriction of tax relief on interest payments by residential property landlords will start in April 2017 as already legislated. Finance Bill 2016 will make some clarifications and amendments to ensure it operates as intended. So beneficiaries of deceased persons’ estates will be entitled to the basic rate tax reduction.
Loans to participators
The loans to participators tax rate will be increased from 6 April 2016 to 32.5%, keeping it aligned with the higher rate of tax charged on dividend income.
Non-UK domiciled individuals who become deemed UK domiciled in April 2017 will be able to treat the cost base of their non-UK assets as being their market value on 6 April 2017. There will be transitional provisions for those who become deemed domiciled under the 15 out of 20 years rule. This is intended to provide certainty on how amounts remitted to the UK will be taxed.
Capital gains tax
The higher rate of capital gains tax (CGT) will be reduced from 28% to 20% and the lower rate will reduce from 18% to 10% with effect from 6 April 2016. The 28% and 18% rates will continue to apply to carried interests and to chargeable gains on residential property.
Stamp duty land tax
The extra 3% stamp duty land tax (SDLT) will apply to purchasesof additional residential properties from 1 April 2016. Following consultation there will be no exemption from the higher rates for significant investors. Purchasers will have 36 months (rather than18 months as originally proposed) to claim a refund of the higher rate if they buy a new main residence before disposing of their previous main residence.
The rates of SDLT on non-residential properties will be reformed from a slab to a banding system similar to that for residential properties. This takes effect from 17 March 2016 with transitional provisions for properties where contracts have already been exchanged. There will be a 0% rate up to £150,000, a 2% rate for the next £100,000, and
a 5% rate above £250,000. A new 2% rate will apply to leasehold transactions with a net present value over £5 million.