The 2016 Budget summary

On 16 March, George Osborne, Chancellor of the Exchequer, read the Budget Statement for the 2016/17 tax year and beyond. The March Budget was directed at future generations and continuing the national recovery.

The famous red briefcase of the UK Budget

State of the economy

  • The UK growth rate has been revised down from 2.4% to 2.2% in 2015/16, 2.0% in 2016/17 and 2.2% in 2017/18 followed by 2.1% up to 2020.
  • Unemployment is at its lowest level since 1974, with an additional 2 million jobs in the economy.
  • Inflation is predicted to be 0.7% in 2016 and 1.6% in 2017, which is still within the target of 2% CPI.
  • The deficit will decrease from 2.9% in 2016 to 1.9% in 2017. It will reduce further, to 1.0%, in 2018 and then move into a surplus from 2019.
  • Duty rates on beer, cider and whiskey will be frozen. All other alcohol duty rates will increase with inflation.
  • There will be no increase in the fuel duty rate.

Personal and business taxation

  • Personal tax allowance to increase to £11,000 from April 2016 and £11,500 from 2017.
  • The 40% (40p) tax threshold is set to rise to £45,000 from £42,385 in 2017.
  • Class 2 National Insurance will be abolished for the self-employed from 2018.
  • The main rate of Corporation Tax will drop to 17% for all businesses from 2020.
  • The threshold for small business rate relief will increase from £6,000 to £15,000, and the higher rate will be increased as well from £18,000 to £51,000.
  • More scrutiny on public sector workers using Personal Service Companies.
  • Effective from midnight tonight, commercial stamp duty will be set at 0% on purchases up to £150,000, 2% on the next £100,000 and 5% top rate above £250,000.
  • There will also be a new 2% rate for high-value leases with net present value above £5 million.
  • Insurance Premium Tax to increase by 0.5%.
  • Sugar tax levy to be introduced on the soft drink industry, the proceeds of which will fund school sports initiatives.

Saving, investments and pensions

  • The ISA tax-free limit will be raised to £20,000 from around £15,000.
  • From April 2017 a new Lifetime ISA for those under 40 will be introduced. As part of this ISA the government will contribute £1 for every £4 you save. This government bonus is valid for every year until you turn 50.
  • Capital Gains Tax to fall from 28% to 20% for higher tax rate payers; and from 18% to 10% for lower tax rate payers. However, the Capital Gains Tax on residential properties remains unchanged.

If you have any questions as to how the Budget will affect your personal or professional finances, please give us a call on + 44 (0) 20 7759 7514 or email us at accountinginfo@1stcontact.com.

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