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UK Tax Budget 2016 – 10 Items That Could Affect Your Business in 2016




  1. Pension fund lifetime allowances reduced: from £1.25million to £1million. Those with income in excess of £150,000 will have the normal £40,000 annual allowance reduced by £1 for every £2 over £150,000.


  1. £1,000 Savings income tax free 2016/17: this is being introduced to allow people to earn on their savings. The basic rate taxpayer who has an income of up to £43,000 a year, will be eligible for this £1,000 tax-free savings The higher rate taxpayer who earns between £43,000 and £150,000, will be eligible for a £500 tax-free savings allowance. Anyone earning over £150,000 a year will be taxed in full on their interest income.


  1. New Dividend rules: the 5,000 tax free dividend allowance announced in the summer budget 2015 will be introduced and once this has been used the rate of tax on the dividend income will increase by 7.5%. Meaning the basic rate taxpayer pays 7.5% tax on the dividend income and the higher rate taxpayer pays 32.5% additional rate taxpayers 38.1%.


  1. 5% tax on loans to participators – The rate of tax will increase from 25% to 32.5% this is in line with the dividend rate for higher rate taxpayers. Please note that this tax is not due if the loan has been repaid within the 9month end of accounting period, this will be repaid to the company if the loan has been written off or repaid after the 9months.


  1. Capital tax rates: There was a reduction in the rate of capital gain tax from 18% to 10% for the basic rate taxpayer and 28% to 20% for the higher rate taxpayer. The rate for disposals of residential property remains the same at 18 and 28 %. The inheritance tax nil rate band has remained the same, there will be an additional nil band made available from 6th April 2017.


  1. Lower corporation tax: which is 20% for all companies, this will be reduced to 19% in April 2017 and further reduced to 17% on the 1st April 2020.


  1. £1,000 Tax free for micro-entrepreneurs this will be introduced in April 2017 aimed at people starting small businesses allowing them an allowance for the first £1,000 of trading income and the first £1,000 of property income.


  1. New corporate tax loss rules: From 1st April 2017 there will be major changes to these rules. For losses incurred on or after 1 April 2017, companies will be able to use carried forward losses against profits from other income streams or from other companies within a group. However, large companies with profits in excess of £5m will only be allowed to offset brought forward losses against 50% of the amount of profit in each future period.


  1. Tax Relief will be increased from £5,000 to £8,000 (the maximum annual donation) allowing charities to claim Gift Aid style top-up payments of up to £2,000 a year.


  1. From 1st April 2016 the VAT registration limit will increase by £1,000 to £83,000, the de-registration limit will increase by £1,000 to £81,000


Find out more about the Budget here or contact us here

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