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17-03-2016
BUDGET 2016 - HIGHLIGHTS
Individuals
— Reduction in capital gains tax rates to 20% and 10% for disposals after 6 April 2016. Reductions do not apply to residential property disposals and carried interest
— Entrepreneurs’ Relief extended to shares held in unlisted trading companies (other than by officers and employees) for 3 years. Effective rate of 10% and separate £10m lifetime limit
— Introduction of lifetime ISAs for under 40s. Up to £4,000 of annual savings topped up by £1,000 from government
— Annual ISA limit increased to £20,000 from April 2017
— Introduction of a cap of £100,000 on exempt capital gains through Employee Shareholder Status
— Non doms will be able to rebase their offshore assets for capital gains tax as at April 2017
Businesses
— Reduction in corporation tax to 17% from April 2020
— A 50% restriction on brought forward losses being set off against current year profits from April 2017 where profits above £5m. A 25% restriction to apply to banks
— Relaxations in the group relief rules for carried forward losses and loss streaming rules from April 2017
— Restrictions on interest relief to 30% of UK earnings or a worldwide interest/earnings ratio where net UK interest is more than £2m
— Significant reductions in tax rates for the for the oil and gas industry
— VAT to apply to UK sales made by offshore online sellers
— Further anti avoidance in respect of hybrid rules involving Permanent Establishments and withholding tax on royalty payments
— Changes to the SDLT regime for commercial property moving to a slice rather than a slab system. Highest rate now 5% above £250k
— Cuts to business rates for small businesses and small properties
— A new Sugar Levy to be introduced on soft drinks manufacturers and importers
— Crackdown on the avoidance of UK tax by offshore property developers
— Termination payments made after April 2018 will be subject to employer NICs
— The rate of tax that applies to loans to participators in close companies increased to 32.5% from April 2016
— Further anti avoidance on disguised remuneration for loans from EBTs
— Self employed class 2 NICs abolished from 2018
Key rates
— Corporation Tax 20%, 19% from 2017, 17% from 2020
— Income Tax, basic rate 20%, higher rate 40%, top rate 45%
— Personal allowance - £10,600, £11,000 from 2016, £11,500 from 2017
— 40% tax rate threshold -£42,385, £43,000 from 2016, £45,000 from 2017
— Capital gains – basic rate taxpayers 10%, other taxpayers 20% from April 2016
— New rates on dividends of 7.5%, 32.5% and 38.1% for basic, higher and top rate taxpayers and £5,000 allowance from 2016
— VAT 20%
— IPT 10% from October 2016
16-03-2016
NATIONAL LIVING WAGE - FACTS & FIGURES
In less than a month’s time, on 1st April 2016, the new National Living Wage (NLW) will come into effect, so you need to make sure you’re prepared. Here’s our guide to the legislation and some advice on managing the changes, to ensure you’re completely compliant.
The new pay rate is set at £7.20 per hour, and applies to almost every type of worker who is aged 25 or older. This includes direct employees and agency workers – but not the self-employed.
What about the National Minimum Wage?
The NLW does NOT replace the National Minimum Wage (NMW) which still applies to workers under the age of 25, with those between 21 and 24 years being legally entitled to the current highest rate of £6.70.
Pay periods and preparation
The National Living Wage will affect any pay periods which start on or after 1st April – so if your pay period starts on the 15th of every month, you only need to start paying the higher rate from then, not the 1st April.
Employers are strongly advised to use the time between now and the start of their April pay period to review the age of employees and identify those who’ll need to change to the new NLW. You should review this information on a regular basis too, as any employee who turns 25 after the NLW has been introduced will be entitled to the higher rate from the start of the first pay reference period that begins after their birthday.
Risks of non-compliance
Employers should note that just like the National Minimum Wage, the National Living Wage is enforceable by law, with the same penalties and fines for non-compliance applying to both rates. The fine is currently set at an amount equal to the underpayment, with a limit of £20,000 per worker.
In addition to a fine, non-compliance could also see you facing a tribunal claim for deduction of wages and you’d also be likely to have to ‘make right’ the underpayment too.
As a final note, it’s important to distinguish between the National Living Wage and the ‘Living Wage’ – the latter is a charitable campaign which is not enforceable in court, but the National Living Wage is a legal requirement and can attract financial penalties