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UK Budget 2016 – How does it affect you?

Do tax changes in the Budget leave you better or worse off?

Two days ago George Osborne presented to Parliament his third Budget in 12 months. You might think that the Chancellor had little left to change that would affect our finances, following Budgets last March and July, and the Autumn Statement in November. You’d be wrong. Tax and savings were central to Mr Osborne’s 62-minute speech. We’ve compiled the main points below to give you an idea what’s going to change and how it affects you.

Allowance and Rate Bands

The amount of income people can earn before they start paying income tax – known as the personal allowance – is rising. The same applies to the income thresholds at which we start paying higher tax rates:

  • The Personal Allowance will increase from £11,000 in 2016/17 to £11,500 in 2017/18.
  • The Basic Rate Limit will increase from £32,000 in 2016/17 to £33,500 in 2017/18.
  • The Higher Rate Threshold will therefore increase from £43,000 in 2016/17 to £45,000 in 2017/18.
  • From 1 April 2016, the VAT registration threshold will increase from £82,000 to £83,000. The deregistration threshold will increase from £80,000 to £81,000.

Tax Allowances for the sharing economy

From April 2017, there will be two new tax-free £1,000 allowances – one for occasionally selling goods or providing services, and one for income from property. People who earn up to £1,000 from occasional work will no longer need to pay tax on that income. The first £1,000 of income from property, such as from renting a driveway, will also be tax-free.

Abolition to Class 2 National Insurance

As from 6 April 2018 self-employed individuals will no longer have to pay what are known as Class 2 NICs. Currently around 3.4 million people are paying this at a rate of £2.80 per week, which contributes to their state pension entitlement and other benefits.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. With effect from 6 April 2016, the current rates of 28% and 18% are to be reduced to 20% and 10% respectively, except in relation to chargeable gains accruing on the disposal of residential property not qualifying for private residence relief and carried interest.

Increased availability of Entrepreneurs Relief for Capital Gains

This measure comes into effect on 6 April 2018 and extends the relief available on Capital Gains made on certain asset sales. Its purpose is to provide financial stimulus to individuals to invest in unlisted trading companies over the long term.

Additional Stamp Duty Land Tax charge

Stamp Duty Land Tax is a tax levied when you purchase a residential property worth more than £125,000 or non-residential properties and land worth over £150,000. As from April 2016 an extra 3% stamp duty will apply to purchases of additional residential properties.

Corporation Tax -Good news for business! The Corporation Tax rate will fall to 17% from 1 April 2020.

Increase in the Loans to Participators tax charge

The measure applies to close companies which make loans to their participators or make other arrangements through which participators extract value. Its purpose is to ensure that the rate of tax chargeable under the loans to participator rules continues to mirror the dividend upper rate, following the changes to dividend taxation from April 2016. The rate of tax charged will increase from 25% to 32.5%.

Individual Savings Account (ISA) is a tax-free wrapper around savings. In other words, the money is not taxed when it is taken out of the account. The overall annual limit will rise from £15,000 to £20,000 from 6 April 2017. A new Lifetime ISA will be available from April 2017 for adults under the age of 40. They will be able to contribute £4,000 per year and receive a 25% bonus from the government. Funds can be used to buy a first home from 12 months after the account opening and be withdrawn from the age of 60.

Insurance Premium Tax (IPT) is a tax on general insurance premiums, including home insurance, car insurance and travel insurance. The standard rate will increase from 9.5% to 10% with effect from 1 October 2016.


  • Fuel duty has been frozen.
  • The duty on beer, spirits and most ciders has been frozen. The duty on most wines and higher strength cider will increase by RPI from 21 March 2016.
  • Duty rates on all tobacco products will increase by 2% above RPI inflation from 6pm on 16 March 2016. £31m is going to be invested in a new group of Border Force and intelligence officers, who will specialise in seizures of illicit tobacco being smuggled into the UK.

Soft drinks sugar tax levy

The levy will be charged from April 2018 on volumes according to total sugar content, with a main rate charge for drink above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres.

If you have any questions concerning any of this please do not hesitate to contact us in the normal way.

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