On Wednesday, the Chancellor announced the first budget under the new parliament. There are some major changes for small businesses and for individuals. The major tax changes are summarised below.

Personal Allowance

  • Tax-free allowance to increase to £11,000 for the from April 2017
  • Further increases pledged in the future

Higher Rate Tax

  • Threshold at which higher rate tax is paid increased to £43,000 (from April 2017)

Dividends

  • 10% tax credit applied to dividends to be scrapped
  • Introduction of £5,000 tax exemption on dividends
  • Above this amount to be taxed at 7.5%/32.5%/38.1% at the basic rate/higher rate/additional rate of tax

Employment Allowance

  • Allowance to be cut for one man companies
  • Allowance to be increased from £2,000 to £3,000 for employers

Corporation Tax

  • Rate to be reduced to from 20% to 19% in 2017
  • Rate to be cut to 18% in 2018

Annual Investment Allowance

  • Allowance set at £200,000 from January 2016
  • Allowance to remain for the remainder of this parliament

Buy-to-Let Interest

  • Tax relief on interest on buy-to-let mortgages to be scaled back to the basic rate of tax

Inheritance Tax

  • ‘Family home allowance’ introduced to increase the inheritance tax threshold to £500,000
  • Allowance equivalent to £1m for couples

Tax Avoidance and Evasion

  • £750m to be allocated to HMRC to tackle identified tax avoidance schemes
  • Non-domiciled UK tax status to be removed, taxing UK residents on worldwide income
Summary
The key changes in the budget are the changes to dividend income which will affect many company’s decision to incorporate and the cut in corporation tax which will return some of the benefits taken away by the employment allowance. The changes only serve to make the tax system more complicated for tax payers in an era where simplifying taxes is supposed to be on the agenda.
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