How the Budget may affect individuals and businesses

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It would be baffling for an accountant’s first blog after The Budget to be on any other topic.

The headlines are usually grabbed by what is happening to fuel duty and whether there will be an extra penny to pay on your next pint, but here I will look at a few of the items that will potentially affect businesses and individuals beyond what they pay on liquids from both types of pump. A widely unexpected announcement of a further reduction in the rate of Corporation Tax will interest owners of local companies. With the rate already announced to be falling to 19% for financial years beginning April 1, 2017 onwards, the drop of a further 2% to 17% for financial years beginning April 1, 2020 certainly raised an eyebrow. With company ownership having become slightly less attractive with the restructuring of taxation on company dividends, this will certainly have acted as a sweetener for many directors in the region.

One headline that will interest many was the reduction in the rates of Capital Gains Tax (CGT), with the higher rate seeing a reduction from 28% to 20% and the basic rate falling from 18% to 10%. This announcement is soured though by an 8% surcharge on the new rates for gains on residential property. This will in all likelihood mean that many will see no effect from the change, although everyone will be glad to see Private Residence Relief ensuring that an individual’s main home will continue to be exempt from CGT.

A further headline that small businesses up and down the country had been calling for was the increase in Small Business Rate Relief threshold from £6,000 to £12,000. This means that businesses with premises given a rateable value of up to £12,000 will not pay any business rates at all.

The March 2016 Budget has continued the Government’s pledge to increase the Personal Allowance to £12,500 by the end of this Parliament, with the latest announcement seeing it set at £11,500 for 2017/18. With individuals set to earn that figure before paying a penny in tax, they may have been interested in the new Lifetime ISA. From April 6, 2017 any adult under 40 will be able to save up to £4,000 each year and receive a 25% bonus from the Government for every pound that they put in. The savings can then be used towards a deposit on a first home valued up to £450,000 or withdrawn tax free after their 60th birthday. A word of warning though, as a withdrawal for any other purpose before their 60th and the Government bonus along with a 5% charge, will be repayable.

This article is of course not exhaustive, so if you require clarification, or want to discuss any changes that were announced you shouldn’t hesitate to contact your accountant.