Chancellor George Osborne has presented what he called his “big Budget”, declaring “Britain needs a pay rise”.
Mr Osborne’s first all-Conservative Budget since the General Election included plans to cut corporation tax but introduce a new national living wage for workers over 25 years old, increasing minimum pay to £7.20 an hour next year, rising to £9 an hour by 2020.
[image type=”thumbnail” float=”left” src=”/wp-content/uploads/sites/2/2015/07/georgeosbornbudget.jpg” alt=”George Osborne Budget”]
Here are the key points for business owners from the Chancellor’s emergency July Budget:
• Corporation tax rates will be reduced from 20% to 19% in the financial year 2017, and 18% in 2020.
• The annual investment allowance of £500,000 will be reduced to £200,000 from 1 January 2016. The corporation tax relief that companies can obtain for the cost of goodwill will be restricted on all deals with effect on or after 8 July.
• The NIC employment allowance of £2,000 will rise to £3,000 from April 2016. Companies where the director is sole employee will no longer be able to claim this allowance.
• Insurance premium tax will increase from 6% to 9.5% from 1 November 2015.
• There will be an extra inheritance tax nil rate band for residences passed on death to descendants, starting at £100,000 in 2017-18 and rising to £175,000 in 2020-21. It will be transferable to surviving spouses and will apply to equivalent amounts where an individual has down-sized on or after 8 July. The extra nil rate band will be tapered by £1 for every £2 of net estate over £2 million. The nil rate band generally will be frozen at £325,000 until 2021.
• Dividend tax credit will be abolished from April 2016 and there will be a new dividend tax allowance of £5,000 a year. The new rates of tax on dividends will be 7.5% for basic rate tax payers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
• Non-UK domiciled individuals who have been resident in UK for at least 15 of the last 20 years will be treated as UK domiciled for tax, including inheritance tax from April 2017.
• The government will consult on radical reform of the system of tax relief for pensions. The introduction of the secondary market in pension annuities has been postponed until 2017.
• The Chancellor said he was “open to further radical change”, suggesting pensions could be “treated like an Isa”.
• Those earning more than £150,000 will have their tax-free contributions allowance cut from the current £40,000 per year to a minimum of £10,000.
• Tax-free personal allowance to be raised from £10,600 to £11,000 next year, with a future target of £12,500.
• Threshold for 40p tax rate raised from £42,385 in this tax year to £43,000 in 2016-17, with a future target of £50,000.
• New cars will need an MOT when they are four years old, not three as now.
• Fuel duty frozen for another year.
• Vehicle Excise Duty is being reformed. New cars will pay a variable rate but beyond the first year drivers will pay £140 in tax on most cars. Zero carbon emission cars are exempt.