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Personal Taxation Surprises and the Introduction of the Sugar Tax

 
As Mr Osborne’s eighth budget commenced, there were some surprises, particularly from a personal taxation perspective including decreased capital gains tax rates and the increased higher tax rate threshold.
 
According to the Chancellor, this budget sees the Government "Act now so we don’t pay later", which is particularly the case for the introduction of the new sugar tax on soft drinks in two years’ time in an effort to combat childhood obesity issues. He introduced his speech by stating that Britain is "not immune to slowdown and shocks" and that the "financial markets are turbulent", which is likely to have impacted the key changes surrounding business rates.
 
It is important to note that the economic forecasts (which the Chancellor would have taken into consideration when introducing the changes below) were predicted based on the UK remaining within the European Union. Therefore the outcome of the EU referendum in June may have a further impact later in 2016 on some of the more general changes.
 
Key points from the Chancellor’s budget were as follows:
 
 
Personal Taxation

  • The tax-free personal allowance to rise to £11,500 in April 2017 (an increase of £500 compared to originally stated)
  • New state backed savings scheme for low-paid workers, worth up to £1,200 over four years
  • The threshold at which individuals pay 40% tax will rise from £42,385 to £45,000 in April 2017
  • Capital Gains tax to be reduced considerably from 28% to 20% for higher rate taxpayers, and from 18% to 10% for basic rate taxpayers
  • Class 2 NIC to be abolished effective from 2018

 
Savings/Pensions

  • The annual ISA limit will rise from £15,240 to £20,000
  • New ‘lifetime’ ISA for individuals aged under 40 with the government contributing £1 for every £4 saved (maximum of £1,000 top up)
  • New state backed savings scheme for low-paid workers, worth up to £1,200 over four years

 
Business Taxation

  • Corporation tax (currently at a rate of 20%) will fall to 17% by 2020
  • Annual threshold for small business rates tax relief to be raised from £6,000 to a maximum of £15,000, exempting 600,000 firms, and the higher rate from £18,000 to £51,000
  • Business rates will also be linked to CPI, the official measure of inflation which has historically been lower than the RPI rates (which is what rates are currently linked to)
  • Anti-tax avoidance and evasion measures to raise £12bn by 2020 

General

  • 0.5% increase in insurance premium tax
  • Fuel duty to be frozen for sixth year in a row
  • Beer, cider and spirits duties to be frozen
  • Excise duties on tobacco to rise by 2% above inflation
  • The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished
  • New tax free allowances for "micro-entrepreneurs" who rent their homes or sell their services through the internet
  • Supplementary charge for oil and gas producers to be halved from 20% to 10%
  • Petroleum revenue tax to be "effectively abolished’"
  • £9bn to be raised by closing corporate tax loopholes
  • Use of personal service companies by public sector employees to reduce tax liabilities to end
  • Commercial stamp duty changes effective from midnight as follows: 0% rate on purchases up to £150,000, 2% on the following £100,000, and 5% top rate above £250,000. New 2% rate for high value leases with a net present value above £5m
  • New sugar levy tax on the soft drinks industry to be introduced in two years’ time
  • Plan for 25% of secondary schools to stay open after 3.30pm
  • Plan for all schools in England to become academies by 2022
  • Plans to enable pupils to study maths until 18
  • £700m available for flood defence schemes
  • Tolls on Severn River crossings to be halved by 2018
  • Disability benefits bill to increase in real terms
  • Tax on the North Sea oil is being cut and will be back dated, effective from the start of the year
  • New elected mayors for cities and towns in Southern England 

 
 
If you require further information on any of the above, please do not hesitate to contact a member of the Spirare team.