The Chancellor delivered his first Conservative budget today.
Over the last few days there had been much speculation on the content and most of it has proven quite accurate.
The points which I have found most appropriate and relevant to business owners are as follows:
• The introduction of the new £7.20 national living wage coming in April 2016 will affect most businesses and will not be welcomed by smaller businesses, who have to administer it. It is a significant increase on £6.70 previously announced to start in October 2015.
• The reduction in corporation tax from 20% to 18% in 2017 is not of immediate benefit, but something businesses can look forward to.
• Businesses will welcome the reduction in the Annual Investment Allowance (AIA), giving businesses tax relief on capital expenditure. Currently set at £500,000, it was scheduled to reduce to £25,000 from the beginning of 2016 and today has been set at £200,000 for the foreseeable future.
• The income tax personal allowance rises from £10,600 in 2015/16 to £11,000 in 2016/17. The higher rate tax threshold will increase from £42,385 in 2015/16 to £43,000 in 2016/17.
• The dividend tax credit will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased for income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. It seems that those with significant dividend income will pay more tax.
• It’s good news for those who rent out a room in their own home, as rent a room relief goes up to £7,500 from £4,250.
• The earlier proposals for a new inheritance tax allowance for the family home will be effective from April 2017. Married couples and civil partners can currently pass any unused amount of their £325,000 allowance on to one another. Under new rules, each individual will be offered a family home allowance to be phased in from 2017/18. This family home allowance will be added to the existing £325,000 Inheritance Tax threshold, meaning the total tax-free allowance for a surviving spouse or civil partner will be up to £1 million in 2020/21. The allowance will be gradually withdrawn for estates worth more than £2 million
• The Employment Allowance which gives relief from employers NIC for the first £2,000 each year is to increase to £3,000 from April 2016. However, single person companies will no longer qualify for this allowance.
• Large companies which have taxable profits over £20m, will feel the benefit of this cut more quickly as they will also be paying their corporation tax earlier under an extension of the quarterly instalment rules, which will require the first payment to be made 3 months earlier than currently for accounting periods starting on or after 1 April 2017.