Now that the dust has settled on last week’s Budget and the immediate storm surrounding disability benefits has subsided, here is a quick round up of the key points from a tax and financial planning perspective:
- A new lifetime ISA will be available from April 2017 for adults under the age of 40 to save up to £4,000 per year with a 25% contribution from the Government making it equivalent to basic rate tax relief on the amounts saved.
- New dividend tax rates and personal allowances take effect on 6 April. These provide a £5,000 tax free allowance per person but then an across the board 7.5% tax increase on any dividends over and above that amount.
- Capital gains tax rates reduce to 20% on 6 April (or 10% for basic rate tax payers).
- Entrepreneurs’ Relief – with its 10% capital gains tax rate – is extended to external investors in unquoted trading companies for new share capital subscribed post Budget day and owned for at least 3 years.
- Corporation tax rates, set to reduce from 20% to 19% in April 2017, will reduce further to 17% in April 2020 and new rules will be introduced in 2017 to allow more flexibility in the use of brought forward trading losses.
- A major revamp of business rates, permanently doubling the small business rate relief.
- A new banded system of stamp duty land tax on commercial property, mirroring the residential property changes introduced last year.
- A package of measures aimed at the residential buy to let sector, including a 3% stamp duty land tax supplementary charge from 1 April this year and changes to the deduction for interest payments from 6 April 2017.
With this Budget, plus the extensive range of measures previously announced and taking effect now, we are currently experiencing one of the most complex periods of change in tax legislation in recent history, making it more and more difficult to plan with certainty. With the prospect of a post EU referendum emergency Budget in the Summer, it does not seem likely that tax is going to get simpler any time soon.