Reduction in the main rate of corporation tax
Corporation tax has been at 20% for all sizes of companies since 1 April 2015, it has been announced it will reduce 1% to 19% from 1 April 2017 and then again to 18% from April 2020.
Annual investment allowance
The annual investment allowance allows 100% capital allowances on qualifying assets in the year of addition up to an annual limit. The annual limit is currently £500,000 and was set to go down to £25,000 from 1 January 2016. However the Government have confirmed that instead there will be a permanent increase in the allowance from 1 January 2016 to £200,000. Which is interesting for capital expenditure tax plans as they will still be complicated on timings of purchase but less worry about the allowance being very small now.
This budget introduces a new National Living Wage for workers aged 25 and above. The intention is for every such worker to earn at least 60% of median earnings by 2020, which is currently forecast to be £9.
NIC employment allowance increase
Since 6 April 2014 employers have been able to make a claim to reduce their secondary class 1 NIC bill by up to £2,000 each year. From April 2016, the employment allowance will increase to £3,000 a small solace for the next point…
Taxation of dividends for individuals
From April 2016 the Government will introduce a new Dividend Tax Allowance of £5,000 a year which is replacing the current dividend tax credit.
Amounts received by an individual above this allowance will be subject to personal tax at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. This replaces the current regime where the individual may claim a Dividend Tax Credit in amount of 10% of the taxable dividend to set against their tax liability. This is likely to dramatically increase the cost of extracting profits via a dividend. Currently the effective tax rates on dividends after the dividend tax credit are 0% (for basic rate taxpayers), 25% for higher rate taxpayers and 30.5% for additional rate taxpayers. This has consequences for all owner managed limited company shareholders as they are looking to tax you more.
If you have any tax questions please do not hesitate to get in touch with us.