It was built up as a “Budget where the Chancellor could make an impression”, and Mr Osborne certainly did just that! He started his speech by saying he had prepared a “one nation Budget”, but unfortunately its contents has split the opinion of the nation.
One thing everyone can agree on is that the current Government REALLY wants to reduce the overall deficit. They government cannot do this by increasing Income Tax, VAT or National Insurance, but what they can do is reform the tax legislation or rules to make up the shortfall imposed by “frozen rates”.
Tomorrow we will deliver our full Budget summary, but in the meantime enclosed are the prominent changes from today’s historic Budget:-
Corporation tax rates: Corporation tax rate will reduce from 20% to 19% in 2017 and 18% in 2020.
Corporation tax payment dates – The government will introduce new payment dates for companies with annual taxable profits of £20 million or more. Where a company is a member of a group, the £20 million threshold will be divided by the number of companies in the group.
Affected companies will be required to pay corporation tax in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period. The measure will apply to accounting periods starting on or after 1 April 2017. The government will publish legislation in draft in the autumn.
Capital allowances: Annual Investment Allowance (AIA) will increase from £25,000 to £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016 Permanently.
Restriction of corporation tax relief for business goodwill amortisation – The government will restrict the corporation tax relief a company may obtain for the cost of ‘goodwill’ (the reputation and customer relationships associated with a business). This will affect all acquisitions and disposals on or after 8 July 2015.
Rent-a-Room relief: The government will increase the level of Rent-a-Room relief from £4,250 to £7,500 from April 2016.
NI Employment Allowance: Increased by £1,000 from £2,000 to £3,000. This will come into effect from April 2016.
Restricting finance cost relief for landlords: The government will restrict the relief on finance costs that individual landlords of residential property can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017.
Personal allowance increase: The government will increase the income tax personal allowance from £10,600 in 2015-16 to £11,000 in 2016- 17. It will increase to £11,200 from 2017-18.
Higher rate threshold increase: The government will increase the higher rate threshold from £42,385 in 2015-16 to £43,000 in 2016-17 and to £43,600 in 2017-18. The NICs Upper Earnings Limit will also increase to remain aligned with the higher rate threshold.
Dividend taxation: The government will remove the Dividend Tax Credit from April 2016 and introduce a new Dividend Tax Allowance of £5,000 a year. The new rates of tax on dividend income above the allowance will be
7.5% for basic rate taxpayers,
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers
Note: all information has been taken from the guidance notes from hmrc.gov.uk.