Budget Review 2016
The key points from the budget:
The state of the economy
- Growth forecasts have been revised down for next three years: 2% in 2016, down from 2.4% in November's Autumn Statement
- GDP (Gross Domestic Product is the broadest measure of the Nation's total economic activity) predicted to grow 2.2% and 2.1% in 2017 and 2018, which is down from four months ago
- A million jobs forecast to be created by 2020
- Inflation of 0.7% forecast for 2016
- Further spending cuts of £3.5bn due by 2020
- Debt targets to be missed. Forecast debt as a share of GDP revised up in each of the next five years to 82.6% in 2016-17 and 81.3%, 79.9%, 77.2%, 74.7% in subsequent years
- Debt to be £9bn lower in 2015-16 in cash terms
- Corporation Tax, currently 20%, is set to fall to 17% by 2020
- Anti-tax avoidance and evasion measures to raise £12bn by 2020
- Annual threshold for small business tax relief to be raised from £6,000 to a maximum of £15,000, exempting thousands of firms
- Supplementary charge for oil and gas producers to be halved from 20% to 10%
- Petroleum revenue tax to be "effectively abolished"
- £9bn to be raised by closing corporate tax loopholes and tax minimisation schemes
- Use of "personal service companies" by public sector employees to reduce tax liabilities to end
- Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight
- The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017
- Tax-free personal allowance to rise to £11,500 in April 2017
- Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers
- 5% rise in Insurance Premium Tax
Pensions and savings
- Annual ISA limit to rise from £15,000 to £20,000
- New "lifetime" Isa for the under-40s, with government putting in £1 for every £4 saved
- New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years
- The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished.
Health and education
- A new sugar tax on the soft drinks industry to be introduced in two years' time, raising £520m which will be spent on primary school sport
- Levy to be calculated on levels of sugar in sweetened drinks produced and imported, based on two bands
- Secondary schools in England to bid for new funding for extra activities like sport and art
- Plan for 25% of secondary schools to stay open after 15:30
- Plan for all schools in England to become academies by 2022
- Plans to enable all pupils to study maths until 18
- £500m to ensure "fair funding" formula for schools in England
- Libor funds to be spent on children's hospital services, specifically in Manchester, Sheffield, Birmingham and Southampton
Alcohol, tobacco, gambling and fuel
- Fuel duty to be frozen for sixth year in a row
- Beer, cider, and spirits duties also to be frozen
- Excise duties on tobacco to rise by 2% above inflation
Housing, infrastructure & transport
- Crossrail 2 in London and the HS3 link between Manchester and Leeds have been approved
- More than £230m to be used for road improvements in the north of England, including upgrades to M62
- £700m for flood defences schemes – raised by the rise in Insurance Premium Tax
- Tolls on Severn River crossings to be halved by 2018
- Disability benefits bill to increase in real terms
What does any of this mean for you & your business?
The key points that would impact contractors seem to be the Personal Taxation and the use of PSC. Of course not forgetting the planned changes with the tax relief on Travel & Subsistence expenses which is set to go ahead despite all of the campaigning and petitions.
The Chancellor stated in the budget that the government has set out in detail the action they are going to take in order to shut down “disguised remuneration schemes.” They have also stated that they are putting a new duty in place to ensure that those working for organisations in the public sector, have to ensure their workers are paying the correct tax.
Other factors that will impact you as a contractor and your business are:
- Tax-free personal allowance to rise to £11,500 by April 2017
- Corporation Tax to be reduced to 17% by April 2020
- Oil and gas contractors will benefit from a reduction in the supplementary charge of 10% and abolishing petroleum revenue tax
- Infrastructure: HS3 rail link between Manchester and Leeds given go ahead as well as the Crossrail 2.
- From April 2017, anybody under the age of 40 can open a lifetime ISA and save up to £4,000 each year. For every £4 you put in the Government puts in £1.
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