The 2016 Budget took place on Wednesday March 16. You
may download the Budget Guide 2016 and Budget 2016 Tax
Rates & Allowances docs that will provide valuable
reference material for tax year 2016-17.
You will find the .pdf on our downloads page
Main Points: Over this period even the smallest employers are legally obliged to provide access to an auto enrolment (AE) compliant pension scheme for eligible staff. Such staff must be automatically opted in (though immediate opt out is possible). Owner Directors of small companies are included, though there are exceptions.
Getting Started: As an employer you must determine by what date you must comply with AE, your staging date. Then you must provide a point of contact with The Pensions Regulator (TPR). From there, you must classify your staff as eligible joholders, non-eligible jobholders, or entitled workers. You may well have a mixture.
Preparation: You should create an action plan. Estimate from your staff classification and your envisaged pension scheme how much it will cost. Consider your systems for capturing and maintaining staff details for pension purposes, or whether you will outsource this. And most importantly select an AE compliant pensions provider.
For all business the annual investment
allowance (AIA) is set indefinitely at 200k gbp from 2016
(currently 500k gbp but was expected to revert to 25k gbp). From being
unified at 20%, the corporation tax rate will reduce to 19% in
2017 and 18% in 2020.
For business, the employment allowance (formally 2000 gbp) that may be deducted from the Class 1 (Employer) NI liability over the year increases to 3k gbp for 2016-17. But note that limited companies where the director is the sole paid employee are now excluded from this benefit.
The corporation tax rate has been the same for all sizes of companies since 01 April 2015. In 2016-17 the rate is set at 20%, falling to 19% over 2018-20, and thereafter is scheduled to fall to 18%.
The taxation of dividends has changed: from April 2016 the basic
rate tax credit disappears, replaced by a tax free allowance of
5k gbp. Thereafter the tax rate will be 7.5% for basic rate
taxpayers, and 32.5% for higher rate taxpayers. This will hit
company owner-directors paid largely in dividends, to the extent
that someone with no other income now earning 38k gbp is currently
tax free but from April 2016 additional personal tax of c1.7k gbp
will be liable.
An additional IHT 'residential' allowance of 175k gbp per person will be afforded by 2020 (100k gbp from April 2017). This means where a home is left to children or grandchildren, instead of having a 325k gbp Nil Band available (650k gbp where a spouse Nil band has already been transferred), the effective Nil Band will be 500k gbp by 2020 (1m gbp with spouse transfer). Note the relief is tapered away after for estates over 2m gbp and disappears at 2.35m gbp, but there will be a provision for elderly downsizers to keep the full allowance
Note that from 06 April 2015 up to 1060 gbp of your personal tax allowance may be transferred to your spouse or partner where your own income is below 10.6k gbp (the 2015 PA) and your other half is not a higher rate taxpayer.
In tax year 2015-16 any mix of cash & stock and shares Isas may be purchased to 15240 gbp per individual. From April 2016 savers may re-nvest withdrawals in the same tax year (not allowed previuosly).
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