Budget 2016: everything you need to know
Last week George Osborne, the Chancellor of the Exchequer, delivered a Budget that delivered tax cuts for businesses and individuals. Here are the key points:
Personal tax – As expected, Osborne raised the lower threshold for income tax to £11,500 and the higher threshold to £45,000 – a larger increase than expected. These new thresholds will come into effect in April next year.
More surprising was the cut in Capital Gains Tax. The basic rate CGT was cut from 18% to 10%, with the higher rate cut from 28% to 20%.
Osborne also announced that Class 2 National Insurance contributions will be abolished, with will give self-employed workers a tax cut of more than £130 when it comes into force in 2018.
It wasn’t all cuts, however. Insurance premium tax was increased from 9.5% to 10%. This increase will be used to fund improvements in flood defences.
Business tax – Some good news for small businesses: the annual threshold for 100% small business rate relief increased from £6,000 to £12,000. The higher rate threshold will rise from £18,000 to £51,000. The headline rate of Corporation Tax is also being cut to 17%.
He also snuck in a rise in tax on loans to participate, up from 25% to 32.5%, which follows on from the Dividend Tax and will inevitably hit small businesses harder.
Pensions and savings – The biggest announcements were around ISAs: the annual ISA limit will increase from £15,240 to £20,000. A new ‘lifetime ISA’ for the under 40s will be introduced from April next year, with the government putting in £1 for every £4 saved. The Chancellor said that this is an alternative to a pension fund for the young, who find pensions “confusing.”