Budget 2016 Summary

“Britain, the Come Back Country” was how Mr Osborne described Britain in his last Budget before the General Election on 7 May.  Despite the Chancellor saying there would be no tax giveaways today, it’s fair to say that there were a “few rabbits being pulled out of the hat”, not least the announced death of the annual tax return.

Mr Osborne said the UK economy was fundamentally stronger than it was 5 years ago, with the North growing faster than the South and with Yorkshire creating more jobs last year than the whole of France.

No mention was made of the significant spending cuts planned in the next government although this omission was highlighted by Mr Miliband in his response.

The main announcements today were:

Personal tax

  • Annual tax returns to be replaced with prepopulated digital tax accounts;
  • Class 2 NIC to be abolished;
  • Personal allowance to be 2015/16 £10,600, 2016/17 £10,800, 2017/18 £11,000;
  • Higher rate tax band to be raised to £43,300 by April 2017;
  • Long term aim to increase personal allowance and higher rate band to £12,500 and £50,000 respectively;
  • Transferable marriage allowance to remain at 10% where both spouses/partners are basic rate tax payers;
  • Benefit in kind rate increases on low emission cars for employees to be slowed down;
  • Review of IHT avoidance using deeds of variation to be undertaken;
  • No reference was made to homes being free from IHT up to £1m, as leaked yesterday;
  • Criminal offences to be progressed for tax avoiders and their professional advisers;
  • Entrepreneur’s relief to only be available for genuine business stake disposals.

Pensions

  • Lifetime allowance to be reduced from £1.25m to £1m from 6 April 2016, to be index linked from 2018;
  • Pensioners can choose not to take an annuity;
  • Abolition of 55% tax for those over 75 drawing down on their pensions.

Savings

  • New savings tax band, exempting first £1,000 of savings from tax (£500 for higher rate tax payers);
  • New flexible ISA to allow taxpayers to draw out and put back into ISAs in same year without losing tax benefits, to be available by the Autumn;
  • New Help to Buy ISA, with 25% contribution from the government to help fund house deposits.

Business tax

  • Farmers’ taxable profits to be spread over 5 years from April 2016, rather than 2, to help deal with price fluctuations;
  • Annual investment allowance currently set to fall to £25,000 from 1 January 2016, to be reviewed in the Autumn Statement, although likely to increase;
  • Enhanced tax reliefs for creative industries;
  • Small business rates relief to be extended until 2018;
  • Clamp down on avoidance by employment intermediaries, agencies and umbrella companies using travel and subsistence claims;
  • Bank levy to be increased and no relief to be available for PPI costs;
  • North Sea industry tax cuts announced.

Duties

  • Beer duty down 1p; cider duty down 2%;
  • September fuel increase will not go ahead.

Charity

  • Funding for new air ambulances in Essex, Herts, East Anglia, Scotland and Wales;
  • Automatic gift aid for events to be increased from £5k to £8k;
  • Blood bike VAT refund promised;
  • £1m spend on defibulators for public places.

A more detailed review of the Budget and the forthcoming measures already announced will be available tomorrow.

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