Against the backdrop of a global slowdown and falling oil prices, Britain’s Chancellor, George Osborne, presented his eighth budget. Revolutionary in some ways, while cautious in other dimensions, The Budget 2016, could grow up to be a watershed moment in Britain’s tax ecosystem. Here, we present some crucial decisions announced at 10 Downing Street, on 16TH March 2016.
- Sugar Tax– Britain became the first country to levy a tax on sugar drinks. The Chancellor hopes to channelize this money into developing sports and health. Milk products and pure fruit juices are exempted from this tax.
- Capital Gains Tax- Two changes; First, the higher rate of capital gains tax will come down to 20 percent from the present 28 percent. Secondly, the basic rate of CGT will be slashed by 8 percent to become 10 percent.
- National Insurance Contribution- As a huge relief for millions of taxpayers, who pay €2.80 weekly to support future pension schemes, the government decided to do away with the Class 2 NIC.
- Fuel Duty to remain unchanged at 57.95p per liter. This comes to safeguard the thousands of jobs related to Oil and other petroleum products. Incidentally, this is the sixth consecutive time that the rate remains unchanged.
- New scheme “LISA”- The government in a bid to encourage savings, will launch a new Lifetime Individual Savings Account. For every saving of €4000 a year, the government will add €1000, which can be withdrawn, without any tax cuts, while retiring or buying a new home. Additionally, a higher ISA limit was also proposed.
- Corporation Tax – Currently at 20 percent, corporation tax will fall to 17 percent by 2020.
- Oil and petroleum products- The supplementary charge on carbon-based fuel will be halved from its present 20 percent. The 10 percent tax will likely attract new investments in the dwindling industrial sector of UK. A number of job cuts were recently seen in the Steel and plastic manufacturing sectors.
- Tolls – The toll tax levied on the Severn River Crossing, which connected Britain with Wales, will be halved by 2018.
- Tax reliefs for museums- To encourage temporary exhibition and off-site educational campaigns the government plans to introduce tax cuts on museums of all kind.
- Business rate- For properties all over England, business rate relief is to be increased to £15,000 from the current £6000. The business rate lowering will cause a £6.7 billion lesser revenue to the government till 2021. This money which will remain in the hands of business owners is expected to turn into investment and economic expansion. It will affect around 600,000 small businesses that won’t be paying any business rate from next April.
- Stamp- Commercial stamp duty for properties up to £150,000 will be zero percent while on the next £200,000 it will be 2 percent. The top rate of 5 percent will be charged on properties worth £250,000 or more.
- Beverages- Duties on beer, cider and spirits remain frozen. On wine and other alcoholic drinks, duties levied will be subjected to inflation.
- Tobacco- Excise duty on tobacco and related products will increase by 2 percent above inflation.
- Tax Evasion- Legal Action to be taken on firms selling products on UK’s soil without paying VAT. It takes into account the demands from various local brick and mortar business who were campaigning to level out the playing field.
- Insurance premium tax- It will move up 0.5 percent to 10 percent. The extra funds will go towards building infrastructure for better flood management.
- Income Tax- The tax burden on the majority of hard working middle class, will find relief as the tax free personal allowance will be increased from £11,000 to £11,500. The 40 percent higher rate income tax charged will remain the same, though, the limits have been increased from £42,385 to £ 45,000.
- Black Money- New laws to counter firms siphoning off money to international tax havens. The measures of counter avoidance will take into consideration the main reason companies state while flushing out money: To pay royalty payments on intellectual rights property.
- Climate change levy will start to increase but only from 2019.
If any of these changes effect your current position, it might be time to get yourself a good accountant in belfast, who can advise on how this budget can effect you tax planning.
The Chancellor while present The Budget 2016, acknowledged some macroeconomic statistics. The global economic environment is a grim picture and the overall growth projection for the UK was lowered to 2 percent from the earlier 2.4 percent. The fiscal situation is about to improve with an expected £10 billion in surplus by 2019-20. Plans are on to further save around £3.5 billion by 2019-20. Though inflation remains under the target 2% , The Bank of England did sound a caution against an emerging economic storm.
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