New Government budget forecasts that the GDP will grow by 2% this year, down from 2.2% last year and below the 2.2% forecast for 2017. The British economy is however still set to grow faster than any other major advanced economy in the world.
Personal tax
ISA allowances not increased
The ISA and Junior ISA allowances will remain on the same level as previously – £15,240 and £4,080 respectively for the 2016/17 tax year. The ISA allowance is however set to increase to £20,000 from April 2017.
Lifetime ISA
The Government has however announced a new ‘Lifetime ISA’, which is intended to help those under 40 to save flexibly for the long term. It will also enable parents and grandparents to gift money. This means that from April 2017, people aged 18 and over will be able to open a Lifetime ISA and contribute £4,000 per annum personally and receive a 25 per cent bonus, which adds up to £5,000 contribution per annum.
Personal savings allowance
The band of savings income subject to the 0% starting rate will be kept at its current level of £5,000 for 2016-17. There will also be a tax-free personal savings allowance (PSA), which will take effect from 6 April 2016 for savings income paid to individuals. Basic rate taxpayers will therefore be able to receive up to £1,000 a year of savings income and higher rate taxpayers up to £500 tax free. The PSA will not be available to additional rate taxpayers.
Dividend taxation changes
From 6 April 2016 the dividend ta credit will be replaced by a new dividend allowance. This will take the form of a 0% tax rate on the first £5,000 of dividend income per tax year. UK residents will pay tax on any dividends received over the £5,000 at the following rates: 7.5% within the basic rate band; 32.5% within the higher rate band; and 38.1% within the additional rate band.
Capital Gains Tax lowered
The higher rate of the Capital Gains Tax will be reduced from 28 per cent to 20 per cent, and the basic rate from 18 per cent to 10 per cent for disposals made on or after 6 April 2016. The previous rates will however continue to apply for chargeable gains on residential property.
Entrepreneurs’ Relief
Entrepreneurs’ Relief will be extended from external investors in unlisted trading companies. The new rules will apply to newly issued shares 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.
Income Tax Personal Allowance
The Income Tax Personal Allowance will increase to £11,000 from 6 April 2016 and £11,500 from 6 April 2017. The higher rate tax threshold will rise to £43,000 from 6 April 2016 and £45,000 from 6 April 2017. The Class 2 National Insurance contributions for the self-employed will be abolished from April 2018.
Business
Corporation tax lowered 2020
The Government has announced that the rate of Corporation Tax will be reduced to 17 per cent from April 2020.
Insurance Premium Tax increase
An increase of 0.5 per cent in Insurance Premium Tax to 10 per cent was announced. This will drive up the cost of insurance from 1 October 2016 and affect both individuals and companies.
Business rates relief treshold rised
The annual threshold for 100 per cent relief on business rates for small firms will rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000. This will exempt 600,000 firms.
