22nd March 2016
Katharine Arthur, Head of Tax (haysmacintyre)
The chancellor delivered his 2016 Budget on Wednesday 16th March, promising to put the "next generation first". Katharine Arthur, Head of Tax at MSI's UK accounting member firm haysmacintyre, provides further details of all key tax announcements.
The sugar levy on soft drinks has unsurprisingly grabbed many headlines, as has the introduction of a lifetime ISA for the under-40s.
Unashamedly including a pro-EU message in his speech, the Chancellor made it clear that all economic forecasts assume that the UK remains in the EU after June’s referendum, and that the economy is on course to clear the deficit by 2020, despite a revision downwards of the growth forecasts. Sterling has dipped slightly this afternoon against both the Dollar and the Euro.
Offering “long-term solutions for long-term problems”, Mr Osborne did however announce quite a number of tax changes, of varying significance. The increase in the Personal Allowance and higher rate threshold for income tax from 2017 are welcome, as are the reductions to the Capital Gains Tax (CGT) rates to 10% for basic rate and 20% for higher rate taxpayers. The reduction in the CGT rate aims to encourage enterprise, and will not therefore apply to the sale of residential property or carried interest for private equity investors.
From midnight tonight, there will be a fundamental reform to Stamp Duty Land Tax (SDLT) for commercial properties, moving to a progressive rather than “slab” system. This now mirrors in structure, if not rates, SDLT on residential property.
For companies, the Treasury’s “Business tax road map” includes a further reduction in the Corporation Tax (CT) rate to 17%, by 2020, which will give the UK one of the lowest CT rates, certainly as compared with other major economies. On the same date, reforms will be made to the loss relief for corporates, to increase the flexibility of the utilisation of losses in different streams or group companies. The cost of this flexibility will be a restriction of relief to 50% of profits above £5m. New rules will also apply, from 2017, to limit the tax relief that large multinationals can claim for their interest expense.
We expect more with the publication of the Finance Bill on 24 March 2016. Please click here to download a full summary for further details of all key tax announcements.
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