How will the 2016 budget affect individuals and owner managed business in North Wales over the forthcoming year?
Small Business Rate Relief (SBRR) will increase so businesses with a property with a rateable value of £12,000 and below will receive 100% relief. Businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief. This should be a significant saving to many high street retailers in particular.
Tax on loans to participators (more commonly referred to as directors loans) will increase from 25% to 32.5% this will apply for loans made on or after 6 April 2016.
Tax on dividends will also change in April 2016 as previously announced. The new rules will entitle an individual to £5000 of tax free dividends per year, after the first £5000 basic rate taxpayers will pay tax at 7.5% on dividend income and higher rate taxpayers will pay tax at 32.5% on dividends.
Goodwill on incorporation – The government will allow entrepreneurs relief to be claimed, subject to certain conditions, on gains on the goodwill of a business when that business is transferred to a company controlled by five or fewer persons or by its directors. We will need to wait for the further details be published but hopefully this will re-open tax planning opportunities on incorporation that had recently been denied, please contact us if you have any queries.
By April 2020 the Corporation tax rate will be cut from the current rate of 20% to 17%.
From April 2018 class two National Insurance will be abolished, this will reduce the tax burden on most self-employed individuals.
A growth deal for North Wales was announced which will be delivered through the Welsh government, the aim is to strengthen the North Wales economy and to make the most of its connection to the ‘Northern Powerhouse’.
Capital gains tax rates will fall from 18% to 10% for basic rate taxpayers and 28% to 20% for higher rate taxpayers with effect from April 2016, however, there will be no reduction in the capital gains tax rates for disposals of residential property as an 8% surcharge will apply, this surcharge will also apply to some other assets.
In addition to the help to buy ISA announced previously the government are introducing a ‘lifetime ISA’ from April 2017 for individuals under 40. Savers will be able to pay up to £4000 per year and receive a 25% contribution from the government (effectively 20% tax relief) up to their 50th birthday. The funds can be withdrawn to purchase your first home providing it is under £450,000 or use in retirement once an individual 60 years or older. The government proposes that withdrawals could be made for other purposes however 5% will be returned to the government. If the individual is a higher rate taxpayer they are likely to benefit from 40% tax relief on pension contributions so their use of investments will need to be considered carefully.
Stamp duty on commercial property will now work on a similar basis to residential property so no stamp duty will be payable on property purchases up to £150,000, 2% will be payable from £150-£250,000 and 5% will be payable above £250,000. From 1 April the government will introduce the previously announced additional 3% on Stamp duty land tax for purchases of additional residential properties. There may be tax planning opportunities to consider should anybody be considering such a purchase.
Auto-enrolment staging dates are now coming into force thick and fast for small businesses, if you have any concerns please contact one of your payroll team.