George Osborne’s first non-coalition Budget was delivered today and, free from the “stabilisers” of the Liberal Democrats, the Chancellor quickly set the tone for the next five years of Conservative Government.
Budget Bingo cards around the country were filled in record time as Osborne dropped well-worn catchphrases left, right and centre. We’re all still in this together, the Conservatives still have a long-term economic plan, they’re still the party of working people – you get the picture.
Fresh from re-election on a staunchly pro-enterprise ticket, business support was at the centre of this Budget. The headlines:
- Corporation Tax will be reduced from 20% to 19% in 2017, and again to 18% in 2020
- The Annual Investment Allowance will be increased from £100,000 to £200,000 from January 2016
- The Employment Allowance will increase by 50% to £3,000 from April 2016
- Local authorities will be able to set Sunday Trading rules for local businesses
There were also several changes to personal taxation which will result in higher take home pay for most people:
- The Personal Allowance will rise to £11,000 next April
- The threshold for the higher rate of income tax will rise to £43,000 next April
- The rates of income tax themselves will remain unchanged
The Chancellor also announced more anti-avoidance measures, including an extra £750 million for HMRC to go after high-profile tax evasion and avoidance (which is expected to return something like £7 billion). The measures which could affect for smaller limited companies are:
- The Dividend Tax Credit will be replaced with a tax-free Dividend Allowance of £5,000, and Dividend tax rates will be changed to 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for those paying the additional rate
- Restrictions will be imposed to stop one-person limited companies using the Employment Allowance – only those with non-director employees will be able to take advantage
Although it wasn’t mentioned in the Budget speech itself, IR35 gets a mention in the Budget document:
The government has asked HMRC to start a dialogue with business on how to improve the effectiveness of existing IR35 legislation. The government wants to find a solution that protects the Exchequer and improves fairness in the system.
The Chancellor’s big announcement – although not one that is likely to affect most freelancers or contractors – is the introduction of a National Living Wage of £7.20 per hour in April 2016, with a target of £9 per hour by 2020.
The new Living Wage must be paid to all employees over the age of 25, whereas the current National Minimum Wage sits at £6.50 for those over 21.
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