Budget 2016: Personal tax roundup
Entrepreneur's relief, lifetime ISAs and Class 2 NICs: All appeared on the chancellor's radar in the Budget 2016
GEORGE OSBORNE used his eight Budget speech to deliver a slew of changes to elements of the personal taxation regime.
An extension of entrepreneurs’ relief is hoped to encourage investment in unlisted trading companies. Newly-issued shares worth up to £10m purchased on or after 17 March will be eligible for relief provided they are held for at least three years from the 6 April 2016.
CGT cuts
That move is accompanied by a change in the rates on capital gains tax, which drops to 20% from 28% for higher and additional rate taxpayers, and to 10% from 18% for basic rate taxpayers on gains other than residential properties and carried interests, for which the existing rates remain the same.
Lifetime ISA
The announcement of a Lifetime ISA could prove a boon for savers under 40 years old. The scheme will see the government contribute £1 for every £4 saved up to a maximum of £4,000 per year until the saver reaches 50 years of age.
An overall saving limit of £15,000 will be imposed, increased to £20,000 from 6 April 2017.
Class 2 NICs
Self-employed workers will no longer have to pay Class 2 NICs from April 2018 after the chancellor confirmed the charge will be abolished. The flat-rate monthly charge had been seen as an administratively burdensome manner in which to raise a very small amount of revenue.
“The abolition of Class 2 NICs is a welcome and overdue simplification of a burdensome charge that generates very little revenue,” BKL tax partner Geraint Jones told Accountancy Age.
Personal Service Companies
Staying with the self-employed, Osborne announced a crackdown on “off-payroll” workers in the public sector. Under the changes, it will be incumbent upon employers to be responsible for applying the tax rules, rather than HMRC. A consultation on the details will be announced in the coming weeks.
For those in full-time work, the government is to tighten the taxation of termination payments in order to prevent “manipulation”. Severance packages of more than £30,000 subject to income tax will also be subject to employer’s NICs.
“The extension of entrepreneurs’ tax relief to unlisted trading shares should encourage further investment in smaller enterprises. For businesses that do not qualify for Enterprise Investment Scheme, this is an interesting development,” Jones added.