The Office for Budget Responsibility (“OBR”) have revised the gross domestic product (“GDP”) growth forecast for this year down to 2% from 2.4%.  However, according to Mr Osborne the UK is still set to grow faster than any other major advanced economy in the world and pointed to record levels of employment.

Even with the growth forecast above, in order to balance the books, the chancellor has asked Treasury ministers to take further action to achieve “efficiency and value for money” to reach the budget surplus goal in 2019/20.

Businesses

The reduction in corporation tax will reach 17% by 2020, from its current level of 20%.  This is timely announcement for many businesses, particularly with the 7.5% increased dividend rates coming into effect from 6^th April this year.

Small business rate relief is an important relief for many business owners.  100% relief is currently available for premises which have a rateable value of £6,000 or less.  However, from April next year, this relief is being extended permanently to £15,000, meaning that 600,000 small businesses will pay no business rates.

Fuel duty has been frozen for the sixth year, which is an important step for many business with high fuel costs.  However, it is not all good news as insurance premium tax is increasing.

Many people still think of Insurance Premium Tax (“IPT”) as being 6%, however, this is not the case.  From November 1^st 2015 the standard rate of IPT was increased to 9.5% and a higher rate band exists for travel insurance, some car insurance and appliance insurance.

The standard rate of IPT will increase to 10% from October 2016, which is better than some pre budget speculation pointing to a 12.5% rate.

Individuals

How did individuals fair? The personal allowance and higher rate tax band are set to increase to £11,500 and £45,000 respectively in April 2017.  Other measures are the introduction of lifetime ISAS for those under 40 and confirmation that class 2 national insurance contributions will be abolished from April 2018.

There is also a reduction in capital gains tax (“CGT”) coming into effect from next month, reduced to 20% for higher rate taxpayers and to 10% for basic rate taxpayers.

It is clear that the government is keen to tax individuals who own more than one residential property, with the reduction in CGT not applying to gains made on these assets.  This is in addition to the additional 3% stamp duty coming into effect from 1 April 2016 for the purchase of second homes and the restriction on interest rate relief to be gradually introduced from 6^th April 2017.

General

As usual there was a focus on tax evasion and avoidance with further measures to counteract these.  There was a particularly interesting announcement regarding personal service companies (“PSC”) contracting in the public sector.  Rather than being able to accept the assurance of the PSCs tax status the onus is going to be put on the state engagers.  This will certainly have an effect on some contractors using a PSC within the public sector.

With the Brexit vote now less than 100 days away these are uncertain times ahead and the chancellor clearly wants to show Britain as being open for business.  Has he achieved this and will this budget change the way people choose to vote. . .  Only time will tell!

If you would like to discuss any of the points raised in the budget or any other accountancy or taxation matter please do get in contact on 01903 300230.