Amidst lots of statistics…more than in previous years it seemed, there were a number of tax changes for owner managed business. There was no one theme just a jumble of different items and as always some of the headline changes were not quite what they appeared to be!
These are the key points that we noted:
• Small business rates relief
From April 2017 small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. There will be a tapered relief on properties worth up to £15,000.
• Reduction in corporation tax
The main rate of corporation tax will be cut further to 17% from 1 April 2020.
• Loans to participators
If a company is owed money by a shareholder then an additional corporation tax charge is payable. This is repaid to the company after the loan has been repaid. The rates are currently 25% but will rise to 32.5% from 6 April 2016.
• Incentives for micro businesses
From April 2017 there will be two new tax free allowances. One for people who make up to £1,000 from occasional jobs, such as selling goods they have made and another allowance of £1,000 for income from property. It is not clear as yet whether there will be any restrictions on those who can claim these reliefs or if these will be available to all.
• Termination payments
From April 2018, employers will need to pay national insurance contributions on termination payments above £30,000 where income tax is also due. For employees who lose their job, payments of up to £30,000 will remain tax free and they will not need to pay national insurance on any of the payment.
Capital Gains Tax
Capital gains tax rates will be reduced from 28% to 20% for higher rate tax payers and from 18% to 10% for basic rate tax payers from 6 April 2016. However, the sting in the tail is that the reduction does not apply to gains made on the sale of residential property.
• Entrepreneurs relief on incorporation
In an apparent U-turn entrepreneurs relief will be available on the sale of goodwill to a limited company made on or after 3 December 2014, subject to certain conditions being met.
• Entrepreneurs relief – review of definitions
There will be a review of the definition of a trading company required to make a claim for entrepreneurs relief, said to be to ensure that this operates effectively.
• Entrepreneurs relief – new investors relief
The relief will be extended to include an investors’ relief. This will be available to investors (not employees) who subscribe for new shares in an unlisted trading company on or after 17 March 2016. The shares need to have been held continually for a period of three years before disposal
• SDLT commercial property
The way stamp duty on commercial property transactions is calculated will change from midnight tonight. Currently rates apply to the whole transaction value, from 17 March 2016 the current slab system will be replaced with a series of tax bands, as follows:
0% for value up to £150,000
2% between £150,001 and £250,000
5% above £250,000
Stamp duty rates for leasehold transactions will also change with a new 2% stamp duty rate on leases with a NPV over £5 million.
Income Tax and Savings
• Lifetime ISA’s
From April 2017 a new Lifetime ISA will be introduced for adults under 40. Savers will be able to pay in £4,000 per year and receive a 25% bonus up to their fiftieth birthday. The funds can be withdrawn from age 60 or at any time after the first 12 months if the funds are used to purchase a first home up to £450,000.
• Personal allowance and tax rate thresholds
The personal allowance will increase to 11,000 in 16/17 and £11,500 in 17/18. The higher rate threshold will increase from £43,000 in 16/17 to £45,000 in 17/18.