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Budget - 16th March 2016

Some of the key points from the March budget are as follows:

  • Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018 - Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year. From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs. Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits. After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.
  • The Personal Allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017
  • The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses. 
  • Double the dedicated funding for sport in primary schools, paid for by a levy on soft drinks - Soft drinks companies will pay a levy on drinks with added sugar from April 2018. This will apply to drinks with total sugar content above 5 grams per 100 millilitres, with a higher rate for more than 8 grams per 100 millilitres. This won’t need to be paid on milk-based drinks or fruit juices.  This will be used to double the primary PE and sport premium (the additional money schools have to spend on PE and sports) to £320 million a year. 
  • A longer school day for 25% of secondary schools - 25% of secondary schools will be able to opt in to a longer school day from September 2017 so that they can offer a wider range of activities for pupils. There will be up to £285 million a year to pay for this. 
  • Every school will be an academy by 2022 - By the end of 2020, every school in England will be an academy or free school – or be in the process of becoming one. This will give head teachers more control over their budget and the curriculum they teach. 
  • Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home - From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money. Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home. The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.
  • Freezing beer duty to help pubs
  • Fuel duty will be frozen again in 2016-17
  • Making sure large companies can’t artificially shift profits out of the UK - Some large companies use excessive interest payments to reduce the tax they pay on their profits in the UK. Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments. 
    Over the next 5 years, the government will raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures, including:
    - introducing rules to prevent multinational companies avoid paying tax in any of the countries they do business in, a technique called hybrid mismatches
    - taxing outbound royalty payments better – these are fees for using intellectual property like patents and copyrights – meaning multinationals pay more tax in the UK
    - making sure offshore property developers are taxed on their UK profits
  • Cutting business rates for all rate payers - From April 2017 small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.
  • Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates - The higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%. There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers). Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out). 
  • Employers will pay National Insurance on pay-offs above £30,000 from April 2018 - Employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due. 
    For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.
  • New stamp duty rates for commercial property from 17 March 2016 - The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band. The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. Buyers of commercial property worth up to £1.05 million will pay less in stamp duty. Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million.

Source: www.gov.uk

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