George Osborne delivered his eighth Budget as Chancellor yesterday. Below are some of the key announcements affecting individuals:
Higher rate threshold to increase to £45,000
The point at which you pay the higher rate of Income Tax (40%) will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.
The Personal Allowance to increase to £11,500
The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017.
Capital Gains Tax to be cut
From 6 April 2016 the higher rate of capital gains tax will be reduced from 28% to 20% and the basic rate will be reduced from 18% to 10%. The reduced rates will not be available on disposals of carried interest and gains on residential properties. These will be subject to an 8% surcharge on the new rates.
Entrepreneurs’ relief will be extended to long term investors in unlisted companies. This will provide a 10% rate of CGT for gains on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016, and subject to a separate lifetime limit of £10 million of gains. This relief is not available to employees or directors.
Stamp Duty Land Tax (SDLT) on additional properties
At midnight yesterday, SDLT payable on non-residential properties was replaced with a progressive rate system, rather than the current slab rate, so that SDLT is charged paid on the portion of the purchase price in each band. The new rates will be 0% for the portion of the transaction value between £0 and £150,000; 2% between £150,001 and £250,000; and 5% above £250,000. There will be transactional rules for those acquisitions where exchange has taken place before 17 March 2016. For larger commercial property acquisitions this change will represent a significant increase in the SDLT cost.
Off-Payroll Engagement in the Public Sector
From April 2017, where the public sector engages an off-payroll worker through their own limited company, that body (or the recruiting agency if the public sector body engages through one) will become responsible for determining whether the rules should apply, and for paying the right tax.
Loans to Participators
The loans to participators tax rate will be increased from 25% to 32.5% in April 2016, with effect for loans, advances and arrangements made on or after 6 April 2016.
Property and trading income allowances
From April 2017, the government will introduce a new £1,000 allowance for property income and a £1,000 allowance for trading income. Individuals with property income or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance.
Changes to the disguised remuneration regime have been introduced with immediate effect, to restrict the effect of rules that allow employees to escape tax charges by paying for assets held in trusts by introducing a targeted anti-avoidance rule – if there is a tax avoidance motive underlying the transaction, it will be treated as giving rise to income tax and NIC charges immediately.
Budget 2016 confirms that non-doms who become deemed-domiciled in April 2017 can treat the cost base of their non-UK based assets as being the market value of that asset on 6 April 2017. Individuals who expect to become deemed UK domicile under the 15 out of 20 year rule will be subject to transitional provision with regards to offshore funds to provide certainty on how amounts remitted to the UK will be taxed.
Pensions and savings
From April 2017 a new Lifetime ISA will be introduced for adults under 40. Savers will be able to pay in £4,000 per year and receive a 25% bonus up to their 50th birthday. The funds can be withdrawn from age 60 or at any time after the first 12 months if the funds are used to purchase a first home up to £450,000. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.
ISA limit to increase to £20,000
The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.