PCR’s summary of the key points of George Osbourne’s 2016 budget affecting businesses and sole traders.

Some welcome tax cuts and freezes here for many, as well as good news for small businesses, 600,000 of which will now pay no business rates. As expected, the changes to CGT and Entrepreneurs’ Relief will have consequences for many.

Tax Changes

Corporation Tax

  • Reduction to 17% in 2020.

Reductions in Capital Gains Tax

  • CGT rates will be reduced from 28% and 18% to 20% and 10% respectively from April 2016 (with the exception of residential property).

Entrepreneurs’ Relief

  • No longer available to investors who do not own 5% or more of the shares of a company.
  • Relief extended to give long term investors a 10% rate of CGT up to £10m (under certain conditions).
  • Reversal of preventions on relief introduced in the 2015 Budget on disposals of goodwill where a business is transferred by a sole trader or partnership into a limited company.

Commercial Stamp Duty

  • Stamp duty on commercial property is now 0% on purchases up to £150,000. The next £100,000 is taxed at 2%, and above £250,000 is now 5%.
  • For leases, a new rate of 2% has been introduced for those above £5m in value.

Business Rates

  • Rate relief for small businesses has been increased from 50% to 100%. This applies to property with a rateable value of £12,000 or less per annum.
  • The consumer price index will be used to set business rates from April 2020, as opposed to the retail price index on which they are currently based.

National Insurance

  • Class 2 National Insurance Contributions abolished from April 2018.

Fuel Duty Freeze

Beer and Cider Duty Freeze

Sugar Tax

  • Two tiered system applicable to drinks with sugar content above 5g per 100ml and drinks with more than 8g per 100ml.

Dividends

  • The income tax rate on dividends will be increased by 7.5% from April 2016.

Loans to shareholders

  • From April 2016 tax on loans advanced to shareholders by a company will be increased to 32.5%.

Personal Service Companies

  • Changes to be introduced in 2017 to the taxation of individuals providing services to public sector companies through personal service companies.

Measures for Small Businesses

£1000 allowance

  • A tax free allowance of £1000 has been introduced for ‘micro-entrepreneurs’ including those who rent out their own property.

The Midlands and the North

  • A new ‘Midlands Engine Investment Fund’ has been created to invest £250m in small businesses in the Midlands.
  • £16m investment in aerospace firms in the East Midlands for research and development.
  • £300m investment in new transport links with the North, including HS3 between Leeds and Manchester.

Enterprise Finance Guarantee scheme

  • The scheme has been extended to March 2018 to help small businesses obtain finance.

There is still a little time left to plan for these measures, particularly if you are looking to make a distribution via a solvent liquidation - do get in touch via our Contact Page for our immediate assistance.

 

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