It seems the Chancellor often uses a headline-grabbing policy in his Budgets. This time we have sugar tax. The cynic might say this is a deliberate ploy to divert attention from generally disappointing news on the state of the economy. Whilst the sugar tax will have little impact on our clients, the following is a summary of the other highlights.
Personal Allowance – An increase in the personal allowance for 2017/18 to £11,500 (£11,000 in 2016/17)
Higher Rate Tax Threshold – A rise in the higher rate threshold to £45,000 for 2017/18 (£43,000 in 2016/17)
Capital Gains Tax Rates – A cut in the main rates of Capital Gains Tax (CGT) from 2016/17 to 20% for higher and additional rate taxpayers and to 10% for basic rate taxpayers, although the existing rates (28% and 18%) will continue to apply to gains on residential property and carried interest
National Insurance – Class 2 NICs will be abolished from April 2018
Entrepreneurs Relief – This will be extended to long-term investors in unlisted companies, and will provide for 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 April 2016, and subject to a separate lifetime limit of £10,000,000 of gains
New Allowances – Two new £1,000 tax allowances for property income and trading income, starting in April 2017
Lifetime ISA and ISA Limit – The launch of a new Lifetime ISA from April 2017 for adults under the age of 40, with a maximum contribution of £4,000 a year and a 25% bonus on savings. Funds, including the government bonus, from the Lifetime ISA can be used to buy a first home at any time from 12 months after the account opening, and be withdrawn from age 60. The standard ISA investment limit will rise to £20,000 at the same time
Corporation Tax Rates – A cut in the corporation tax rate to 17% in 2020 from the previous target of 18%.
To balance the highlights there were also some negatives:
Property Tax Reforms – the Chancellor confirmed that the finance cost restrictions for residential landlords will come into effect from April 2017, and also that the 10% Wear & Tear allowance for furnished residential property will be abolished from April 2016
Termination Payments – From April 2018 termination payments over £30,000 which are subject to Income Tax will also be subject to Employer National Insurance contributions
Pension Reforms – The lifetime allowance will reduce from £1.25 million to £1 million from April 2016.
In other news:
We heard in the Autumn Statement that basic rate interest would not be deducted at source from bank interest from April 2016, but we were uncertain how this would affect payments from Unit Trust etc. This Budget has confirmed that interest from Open-Ended Investment Companies, Unit Trusts, Investment Trusts and Peer-to-Peer loans may be paid without deduction of Income Tax from April 2017. In other words, tax will continue to be deducted at source from such payments for the time being.
Non-Domicile Taxation – The Government is planning a review of all of its non-dom reforms in the Finance Bill 2017. This Budget simply confirmed that non-doms who become ‘deemed’ domiciled in April 2017 can treat the base cost of their non-UK based assets as being the market value of those assets on 6 April 2017. Individuals who expect to become deemed UK domiciled under the new rules will face a set of transitional provisions, which bridge the gap between the old legislation and the new. These provisions will help to determine how offshore funds are treated for tax as and when non-doms bring capital into the UK.
For specific guidance relating to your own personal circumstances, please contact us or call +44 (0) 1903 231545.