The Finance Bill became the Finance Act 2016 as it received Royal Assent this month. We have a new law which has hundreds of measures packed into it. We’ve read the whole thing so you don’t have to!
Here are the main changes:
Corporation Tax reduced in future years
The main rate for 2016/17 is still 20%. The rate for 2017/18, 2018/19, and 2019/20 will be 19%. The rate for 2020/21 is set at 17%; it was previously planned to be 18% until the Act passed.
Dividend Tax increased
Despite our widely-supported campaigning, the old system of dividend tax credits has been abolished for the 2016/17 tax year. Instead, after introducing a £5,000 ‘dividend tax allowance’ (which is tax-free), dividends are taxed at 7.5%, 32.5% and 38.1% bands, a big jump from previous years.
Restrictions on claiming travel and subsistence expenses
Also applying retrospectively from April 2016 are new rules to prevent some contractors from claiming travel and subsistence expenses when using a regular place of work. Read our submission to government on this plan when it was first proposed.
Clamp down on tax evasion
The Act also continues the welcome Government clamp down on various methods of tax evasion and extends HMRC’s ability to detect some illicit behaviours through using data sources.
Those are the main measures which will affect freelancers, contractors, entrepreneurs and micro-businesses.
Also of interest is that the Act puts the Treasury’s Office of Tax Simplification on a legal footing, making it more of a permanent feature of the fiscal policy landscape. This is good news as so far, the office has produced very helpful and insightful reports into the state of the UK tax system, including proposals that would potentially be very welcome for micro-businesses.