Overview Tax Information
Tax rates and deadlines, plus Budget summaries.
Chancellor pledges post-Brexit economy ‘that works for everyone’
The new Chancellor of the Exchequer, Philip Hammond, acknowledged ‘sharp challenges ahead’ for the economy as he presented his first major fiscal statement, exactly five months after the UK’s historic vote to leave the European Union.
The latest forecasts from the Office for Budget Responsibility confirmed an increase in borrowing, which is now forecast to reach £68.2bn this year. Economic growth is expected to slow over the next two years, initially rising marginally to 2.1% for 2016, but then reducing to 1.4% in 2017. Overall, the ‘Brexit effect’ is expected to impact on economic growth to the tune of 2.4%.
Having paid tribute to his predecessor, Mr Hammond then proceeded to sweep away George Osborne’s fiscal targets, announcing a new draft Charter for Budget Responsibility. This replaces the aim of balancing the books by 2020 with a pledge to deliver a surplus ‘as early as practicable’ in the next Parliament, and an emphasis on allowing sufficient flexibility to build a resilient economy.
The Chancellor proposes to do this by prioritising investment in UK infrastructure and innovation, and announced the creation of a new £23bn National Productivity Investment Fund (NPIF) which will provide additional funding in four areas: transport, digital communications, research and development, and housing.
The Statement included a number of other significant measures for businesses, including confirmation that corporation tax will be reduced to 17% by 2020 as planned, together with the implementation of the business rates reduction package. In other announcements, from April 2017 employee and employer national insurance thresholds will be aligned, and salary sacrifice schemes will be scaled back, with most schemes being subject to the same tax as cash income, although some exemptions will apply.
Emphasising the government’s stated commitment to low and middle income workers, the Chancellor announced that from April 2017 the Universal Credit taper rate will be reduced from 65p to 63p for every pound of net earnings. The National Living Wage and National Minimum Wage will also rise with effect from April 2017. The government’s plans to raise the income tax personal allowance to £12,500 and the higher rate income tax threshold to £50,000 by 2020/21 were also confirmed, while a new NS&I Investment Bond will be launched for savers.
Other announcements included further measures to counter tax avoidance, an increase in insurance premium tax from 1 June 2017, and a freeze on fuel duty for the seventh consecutive year.
In a final flourish, and marking a major change to policy-making processes, the Chancellor announced that his first Autumn Statement would also be his last. 2017 will see the final Spring Budget, as from that point on the main Budget will be held in the Autumn.
It was confirmed that the corporation tax rate, currently 20%, will be 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019, and 17% for the financial year beginning 1 April 2020.
Rural rate relief
Rural rate relief will increase from 50% to 100% in April 2017. It is available to businesses in rural areas with a population under 3,000, where that business is the only village shop or post office with a rateable value of up to £8,500; or the only public house or petrol station with a rateable value of up to £12,500.
National insurance contributions (NICs)
The national insurance secondary (employer) threshold and the national insurance primary (employee) threshold will be aligned from 6 April 2017, meaning that both employees and employers will start paying national insurance on weekly earnings above £157.
As announced at Budget 2016, Class 2 NICs will be abolished from April 2018. It has been confirmed that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition.
British Business Bank
The British Business Bank will invest an additional £400m in venture capital funds, in order to ‘unlock up to £1bn of new investment in innovative firms planning to scale up’.
Charge points for electric vehicles
Legislation will be introduced in Finance Bill 2017 to provide a 100% first-year allowance for expenditure incurred on electric charge-point equipment for electric vehicles. The measure will be backdated to have effect for expenditure incurred on or after 23 November 2016. It will expire on 31 March 2019 for corporation tax and 5 April 2019 for income tax purposes.
Annual Tax on Enveloped Dwellings (ATED)
The annual charges for the ATED will rise in line with inflation for the 2017/18 chargeable period.
Research and Development (R&D)
The National Productivity Investment Fund will provide an additional £4.7bn in R&D funding by 2020/21. Projects will include an Industrial Strategy Challenge Fund to support collaborations between business and the UK science base, and an increase in grant funding through Innovate UK.
The government will also look at ways to build on the ‘above the line’ R&D tax credit, with the aim of further incentivising R&D.
The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules where R&D is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’. These will ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.
Strengthening sanctions and deterrents
The government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. The government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements.
Money Purchase Annual Allowance (MPAA)
Changes introduced in April 2015 gave individuals greater flexibility over how and when they take their pension savings.
Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special MPAA.
Subject to consultation on the detail, the MPAA will be reduced from £10,000 to £4,000 from April 2017.
VAT Flat Rate Scheme
There will be a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses. Anti-forestalling provisions have been introduced to prevent any business defined as a limited cost trader from continuing to use a lower flat rate beyond 1 April 2017.
The Finance Bill 2017 will introduce a new penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The new penalty will be a fixed rate penalty of 30% of the VAT due.
Disguised remuneration schemes
Previously announced changes intended to tackle the use of disguised remuneration schemes by employers and employees will be extended to include the self-employed.
Employee Shareholder Status (ESS)
The tax advantages linked to shares awarded under ESS will be abolished for arrangements entered into on, or after, 1 December 2016. The status itself will be closed to new arrangements at the next legislative opportunity.
Personal allowance and higher rate threshold
The Chancellor confirmed that the personal allowance will rise to £11,500 and the higher rate threshold to £45,000 from 6 April 2017. He stated that the government will meet its commitment to raise the income tax personal allowance to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament. Once the personal allowance reaches £12,500, it will then rise in line with the Consumer Prices Index (CPI).
NS&I Investment Bond
NS&I will offer a new three-year savings bond from Spring 2017. The indicative rate is 2.2% but this may be adjusted to reflect market conditions when the product is launched. The bond will be open to those aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.
The annual subscription limit for Junior ISAs and Child Trust Funds will be uprated in line with CPI to £4,128.
As previously announced, the ISA limit will rise from £15,240 to £20,000. Both of these changes take effect from 6 April 2017.
National Living Wage (NLW) and National Minimum Wage (NMW)
Following the recommendations of the Low Pay Commission, the government will increase the NLW to £7.50 from April 2017.
The government will also accept all of their recommendations for the other NMW rates, which were last increased in October 2016. From April 2017 the increased rates will be as follows:
- £7.05 per hour for 21 to 24 year olds
- £5.60 per hour for 18 to 20 year olds
- £4.05 per hour for 16 to 17 year olds
- £3.50 per hour for apprentices (under 19, or 19 and over in the first year of their apprenticeship).
The government will invest to strengthen NMW enforcement. They will also provide additional support targeted at small businesses to help them to comply, and a campaign aimed at raising awareness amongst workers and employers regarding their rights and responsibilities.
Universal Credit taper
From April 2017, the taper rate that applies to earnings above the income threshold in Universal Credit will be reduced from 65% to 63%.
The government will publish a consultation on options to tackle pension scams, including banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse ‘small self-administered schemes’.
Pay as You Earn Settlement Agreement (PSA) process
As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to simplify the process for applying for and agreeing PSAs.
This will have effect in relation to agreements for the 2018/19 tax year and subsequent tax years.
Transport and infrastructure
The main rate of fuel duty for petrol and diesel will remain frozen for the seventh successive year at 57.95p per litre.
Company car tax
From 2020/21 new, lower bands will be introduced for the lowest CO2 emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by one percentage point.
Transport infrastructure investment
As part of the National Productivity Investment Fund (NPIF), transport infrastructure investment will include £1.1bn to reduce congestion and upgrade local roads and public transport, £220m to tackle road safety and congestion on Highways England roads and £27m to develop an expressway connecting Oxford and Cambridge. £450m will also be spent on trialling railway digital signalling technology.
Future transport technology
The NPIF will also provide £390m for future transport technology. This will include: £100m investment in testing infrastructure for driverless cars; £150m to provide at least 550 new electric and hydrogen buses, reduce the emissions of 1,500 existing buses and support taxis to become zero emission; and £80m to install more charging points for ultra-low emission vehicles.
Broadband and 5G networks
The government will invest over £1bn by 2020/21, including £740m through the NPIF, to support the roll out of full-fibre connections and future 5G communications. Measures will include a new 100% business rates relief for new full-fibre infrastructure for a five year period from 1 April 2017.
Infrastructure for devolved national governments
The devolved national governments will each receive additional funds which can be spent on infrastructure projects. There will be an increase of over £800m for the Scottish government, over £400m for the Welsh government and over £250m for the Northern Ireland Executive, with each devolved administration deciding where this money will be spent.
The government will invest £170m in flood defence and resilience measures. £20m of this investment will be for new flood defence schemes, £50m for rail resilience projects, including Dawlish, and £100m to improve the resilience of roads to flooding.
A new £2.3bn Housing Infrastructure Fund will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas designated to be most at need of new housing.
An additional £1.4bn will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. A further £1.7bn will be used to accelerate the construction of new homes on public sector land.
The government will also fund a regional pilot of the Right to Buy for housing association tenants, under which more than 3,000 tenants will be able to buy their own home with Right to Buy discounts.
Insurance premium tax (IPT)
The standard rate of IPT will rise from 10% to 12% from 1 June 2017.
Letting agent fees
The Department for Communities and Local Government will consult ahead of bringing forward legislation to ban letting agents’ fees charged to tenants.
LIBOR banking fines
The government has committed a further £102m of banking fines over the next four years to support Armed Forces and Emergency Services charities and other related good causes.
Museums and galleries tax relief
The government will broaden the scope of the museums and galleries tax relief announced at Budget 2016 to include permanent exhibitions.
The rates of relief will be set at 25% for touring exhibitions and 20% for non-touring exhibitions and the relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will take effect from 1 April 2017 and will be reviewed in 2020.
Investing in culture
The Chancellor announced over £10m to support culture and heritage projects across the UK.
Prison safety and reform
The government will provide up to £500m of additional funding to the Ministry of Justice. As part of the Prison Safety and Reform white paper, this will enable the recruitment of 2,500 extra prison officers. It will also fund wider reforms to the justice system.
Autumn Statement abolishes Autumn Statements
Chancellor Philip Hammond surprised the House by announcing that his first Autumn Statement would also be his last – with a major change to the way fiscal events are scheduled.
Following the Spring 2017 Budget and Finance Bill, Budgets will in future be delivered in the Autumn, with the first one taking place in Autumn 2017.
The Office for Budget Responsibility will produce a Spring forecast from 2018 and the Chancellor will make a new Spring Statement responding to that forecast.
Profile: The new Chancellor
Who: Philip Hammond, Chancellor of the Exchequer; Conservative MP for Runnymede and Weybridge
Background: A former company director, Philip Hammond entered Parliament in 1997 and was promoted into the Shadow Cabinet by David Cameron in 2005. He then worked under George Osborne as Shadow Chief Secretary to the Treasury.
In the Coalition government he held increasingly senior Cabinet positions, progressing from Secretary of State for Transport, to Defence, and finally Foreign and Commonwealth Affairs. When Theresa May succeeded Cameron as Prime Minister in July 2016, she quickly appointed Hammond as Chancellor of the Exchequer in place of Osborne.
Political views: Although considered to be broadly Eurosceptic prior to the referendum, Hammond campaigned for Britain to remain in the EU. As Chancellor, he indicated early on that he would emphasise investment in infrastructure and housing over his predecessor’s deficit reduction targets. The Autumn Statement is his first major announcement in the role.
What they said
‘The figures speak for themselves. Growth down, wage growth down, business investment down, and their own deficit target failed.’
Shadow Chancellor John McDonnell
‘Reducing the frequency of fiscal events along with the commitment to stick with the tax roadmap will provide stability for businesses. Importantly, the new fiscal rules provide the government with welcome flexibility, while remaining prudent in uncertain times.’
Carolyn Fairbairn, Director General of the Confederation of British Industry
‘The official figures have revealed a £220bn Brexit black hole – hundreds of billions taken out of our economy when we need it most. Given how bad the outlook is, it’s no wonder the Chancellor doesn’t want to have to do another Autumn Statement.’
Tim Farron, Leader of the Liberal Democrats
‘The Chancellor’s strong focus on the growth requirements of our cities, regions and nations will not go unnoticed in business communities across the UK.’
Adam Marshall, Director General of the British Chambers of Commerce
‘Today’s OBR forecast shows that the average annual wage will be £1,000 lower in 2020 than predicted at the Budget. And this is on top of wages still having not recovered to their 2007 levels.’
Frances O’Grady, General Secretary of the Trades Union Congress
‘We resolve today to confront [our] challenges head on. To prepare our country to seize the opportunities ahead. And in doing so, to build an economy that works for everyone… and where every corner of this United Kingdom is part of our national success.’
Chancellor Philip Hammond
Introduction & highlights
Chancellor presents a ‘next-generation Budget’ as the storm clouds gather
Chancellor George Osborne delivered his eighth Budget to the House of Commons, dubbing it a ‘Budget for the long term’ but warning that ‘the storm clouds are gathering again’.
Having proclaimed that the British economy is ‘fit for the future’ and that the Government remains on course to achieve a budget surplus of £10.4bn in 2019/20, the Chancellor warned that growing global economic gloom threatens the UK.
With low productivity growth and a weak global outlook continuing to present a ‘dangerous cocktail of risks’, the Chancellor revealed that the Office for Budget Responsibility (OBR) has significantly revised down its economic forecasts for the next five years, with UK economic growth forecast to be just 2% in 2016.
Official figures also revealed that the Chancellor has missed his target to reduce debt as a share of GDP. Borrowing forecasts have been revised upwards to £55.5bn for 2016/17, and the Chancellor announced the need for deeper spending cuts, with £3.5bn of additional savings to be made by 2019/20.
With an EU referendum fast approaching the Chancellor was keen to point out that the OBR’s forecasts were predicated on there being no Brexit, and claimed that leaving the EU could usher in a ‘period of uncertainty’ for the UK.
The Chancellor revealed a package of business tax measures, announcing that in England the Small Business Rate Relief threshold will rise from £6,000 to £12,000 from April 2017 and promising further radical changes, with the uprating of business rates set to change from RPI to CPI. Greater London will see the complete devolution of business rates from next April.
Meanwhile, for individuals, building on the recent announcement of a new Help to Save scheme, the Chancellor unveiled a new Lifetime ISA, which is intended to allow adults aged under 40 the opportunity to save up to £4,000 a year towards buying their first home (up to a limit of £450,000) or to save towards their retirement, and which the Government will top up by 25%.
Other key announcements on personal taxation included the next step in the Government’s drive to increase the income tax personal allowance, which will rise to £11,500 from April 2017, at which time the threshold for higher rate tax will also rise to £45,000.
Capital gains tax rates will also be cut, with the headline rate falling from 28% to 20% and the basic rate from 18% to 10% with effect from 6 April 2016.
Fuel duty will remain frozen for the sixth consecutive year, while tobacco duties will rise above inflation, and from 2018 a new sugar levy on the soft drinks industry will aim to combat the problem of childhood obesity.
Other significant measures include additional investment in the nation’s infrastructure, further measures towards the ‘devolution revolution’ and plans to turn every school in England into an academy.
- Small Business Rate Relief threshold rising to £12,000
- Corporation tax to reach 17% from April 2020
- New Lifetime ISA for the under-40s
- Stamp duty on commercial property reduced for lower bands
- Capital gains tax to be cut from 28% to 20%
- Income tax personal allowance rising to £11,500 from April 2017
- Class 2 NICs for the self-employed abolished from 2018
- ISA allowance to rise to £20,000
- New sugar levy on soft drinks from 2018
Business tax and investment incentives
Corporation tax rates are as follows:
Financial Year to 31 March 2017 31 March 2016 Corporation tax rate 20% 20%
The corporation tax rate will be 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019, and 17% for the financial year beginning 1 April 2020.
Corporation tax loss relief
For losses incurred on or after 1 April 2017, businesses will be able to use carried forward losses against profits from other income streams or from other companies within a group.
From 1 April 2017, the amount of profit that can be offset through losses carried forward will be restricted to 50%. This restriction will only apply to profits in excess of £5m. For groups, the £5m allowance will apply to the group.
Corporation tax payment dates
It was previously announced that companies with annual taxable profits of £20m or more would make corporation tax payments in the third, sixth, ninth and twelfth months of their accounting period. The introduction of this is to be deferred so that the new payment dates will now apply to accounting periods starting on or after 1 April 2019.
Tax deductibility of corporate interest expenses
The Government is to cap the amount of relief for interest to 30% of a group’s taxable earnings in the UK or based on the net interest to earnings ratio for the worldwide group. The rule will be introduced from 1 April 2017 and will include a group threshold limit of £2m net UK interest expense and provisions for public benefit infrastructure.
Loans to participators
The rate of tax charged on loans to participators and other arrangements is to be increased from 25% to 32.5% so that it continues to mirror the higher rate of dividend tax. This new rate will apply to loans made and benefits conferred by close companies on or after 6 April 2016. For accounting periods which straddle 6 April 2016, different rates will be applied to separate loans made or benefits conferred before, and on or after, 6 April 2016.
Personal service companies
From April 2017, individuals working through their own company in the public sector will no longer be responsible for deciding whether the intermediaries legislation (known as IR35) applies and then paying the relevant tax and national insurance contributions (NICs). This responsibility will instead move to the public sector employer, agency, or third party that pays the worker’s intermediary. They will have to decide if the rules apply to a contract and, if so, account for and pay the liabilities through the RTI system and deduct the relevant tax and NICs.
The existing IR35 rules will continue as they are now for non-public sector engagements.
Profits from trading in and developing UK land
Legislation will be introduced to ensure that non-resident developers of UK property will always be brought into UK tax on the profits from that development. The legislation puts in place a specific set of rules to tax trading profits derived from land in the UK and these rules will apply equally to resident and non-resident businesses, and will not depend on the existence of a ‘permanent establishment’ in the UK.
The legislation will be introduced at Report Stage of Finance Bill 2016 and will take effect from the date of introduction. Anti-avoidance rules will take effect from Budget Day to counteract arrangements, put in place between Budget Day and the date the new legislation is introduced, that are designed to get around the charge.
Research and Development (R&D)
Legislation is to be introduced to prevent an unintended reduction in the R&D relief available to some SMEs when the Large Company relief, which is being replaced by R&D Expenditure Credit, expires on 31 March 2016. The revised calculation will apply in respect of expenditure incurred on or after 1 April 2016.
Vaccine research relief will cease to apply to expenditure inccurred on or after 1 April 2017.
Enterprise Management Incentives (EMI)
A rights issue which takes place on or after 6 April 2016 in respect of shares received on exercise of an EMI option will be treated in the same way for share identification purposes as other rights issues: the new shares will be treated as acquired at the same time as the original shares.
The period in which businesses investing in new plant and machinery, in enhanced capital allowance sites in Enterprise Zones, can qualify for 100% capital allowances is to be extended to eight years. The legislation will have effect from Royal Assent.
Venture capital schemes
The method of determining the five year period for the average turnover amount and the relevant three preceding years for the operating costs conditions will be clarified for both Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) to ensure that the most recently filed accounts of a company are generally used to determine the end date of the relevant period. This will have effect from 18 November 2015 for shares issued under EIS and for investments made by VCTs, however an investee company may elect to apply the existing legislation for investments received between 18 November 2015 and 5 April 2016, inclusive.
A new condition will be introduced to clarify the non-qualifying investments a VCT may make for liquidity management purposes. This will have effect from 6 April 2016.
Trading income received in non-monetary form
Legislation will be introduced to confirm that trading and property business income received in non-monetary form is brought into account in calculating taxable profits for corporation tax and income tax purposes. This will have effect in relation to transactions occurring on or after 16 March 2016.
National Insurance Contributions (NICs)
Class 1 Payable on weekly earnings of Below £112 (lower earnings limit) Nil – £112 to £155 (primary threshold) *0% – Below £156 (secondary threshold) – Nil Above £156 – 13.8% £155.01 – £827 (upper earnings limit) **12% – £156.01 – £827 (upper secondary threshold (UST) for under 21s) 12% 0% £156.01 – £827 (apprentice upper secondary threshold (AUST) for under 25s) 12% 0% Above £827 **2% – *No NICs are actually payable but a notional Class 1 NIC is deemed to have been paid; this protects contributory benefit entitlement.
**Over state pension age, the employee contribution is generally nil.
Employment allowance up to £3,000 (per year) Class 1A On relevant benefits 13.8% Class 2 Self employed £2.80 per week Small profits threshold £5,965 per annum Class 3 Voluntary £14.10 per week Class 3A Voluntary contributions may be available to 5 April 2017 in order to obtain extra additional State Pension (maximum £25 a week) – variable contribution rates according to age. Class 4 Self employed on annual profits £8,060 – £43,000 *9% Excess over £43,000 *2% *Exemption applies if state pension age was reached by 6 April 2016.
Changes to the Employment Allowance
From April 2016 the annual Employment Allowance for employer NICs increases from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance.
It was announced that from April 2018, Class 2 NICs will be abolished, and a reform of Class 4 NICs will be undertaken.
From April 2018, employer NICs will be due on termination payments above £30,000 that are already subject to income tax.
The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs.
Tax and travel
Car and fuel benefits
The taxable petrol and diesel car benefit is based on the car’s CO2 emissions. It is calculated using the car’s UK list price and applying the ‘appropriate percentage’, as shown in the table on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2016/17 is £22,200.
From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km (5%) and 51-75 g/km (9%).
The appropriate percentages for the remaining bands were increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.
From April 2016, all the appropriate percentages will be increased by 2%, up to the maximum of 37%. In addition, new European standards which came into force in September 2015 required diesel cars to have the same air quality emissions as petrol cars. The 3% diesel supplement was set to be removed in April 2016. However, it will now be retained until April 2021, when EU-wide testing procedures will ensure new diesel cars meet air quality standards even under strict real-world driving conditions.
The appropriate percentage will increase by 2% for cars emitting more than 75 g/km to a maximum of 37% in each of years 2017/18 and 2018/19.
CO2 emissions (g/km) Appropriate percentage Petrol % Diesel % 0 – 50 7 10 51– 75 11 14 76 – 94 15 18 95 – 99 16 19 100 – 104 17 20 105 – 109 18 21 110 – 114 19 22 115 – 119 20 23 120 – 124 21 24 125 – 129 22 25 130 – 134 23 26 135 – 139 24 27 140 – 144 25 28 145 – 149 26 29 150 – 154 27 30 155 – 159 28 31 160 – 164 29 32 165 – 169 30 33 170 – 174 31 34 175 – 179 32 35 180 – 184 33 36 185 – 189 34 37 190 – 194 35 195 – 199 36 200 and above 37
VAT on fuel for private use in cars
Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use the flat rate valuation charge.
Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 35% towards the cost of the vehicle, up to a maximum of either £2,500 or £4,500 depending on the model. The scheme also covers new qualifying ultra-low emission vans, where the available grant will be 20% towards the cost of the vehicle, up to a maximum of £8,000. Vehicles with CO2 emissions of 75 g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are potentially eligible for the subsidy. There are strict criteria to be met before specific vehicles can be confirmed as eligible under the rules of the scheme.
Zero emission vans
As previously announced, the benefit for zero emission vans is to be increased on a tapered basis so that there will be a single van benefit charge applying to all vans by April 2020. For 2016/17 the charge will be 20% of the value of the standard van benefit charge (i.e. £634). There is no fuel benefit for such vans, as set out below.
The taxable benefit for the unrestricted private use of vans is £3,170. There is a further £598 taxable benefit if the employer provides fuel for private travel.
Van and fuel charge Van £ Fuel £ Total £ Tax (20% taxpayer) 634 119.60 753.60 Tax (40% taxpayer) 1,268 239.20 1,507.20 Tax (45% taxpayer) 1,426.50 269.10 1,695.60 Employer’s Class 1A NICs 437.46 82.52 519.98
Changes to the HMRC business mileage rates are announced from time to time. The rates from 1 March 2016 are as follows:
Vehicle First 10,000 miles Thereafter Car / Van 45p 25p Motorcycle 24p 24p Bicycle 20p 20p
Engine Capacity Petrol Diesel LPG 1400cc or less 10p 8p 7p 1401 – 1600cc 12p 8p 8p 1601 – 2000cc 12p 10p 8p Over 2000cc 19p 11p 13p
The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys. HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.
Car costs – Vehicle Excise Duty (VED) rates
VED (‘Car Tax’) rates also reflect emissions. The following table shows the standard rates which apply from 1 April 2016 for cars registered on or after 1 March 2001.
VED Band CO2 emissions Standard Rate First Year Rate (g/km) £ £ A Up to 100 0 0 B 101 – 110 20 0 C 111 – 120 30 0 D 121 – 130 110 0 E 131 – 140 130 130 F 141 – 150 145 145 G 151 – 165 185 185 H 166 – 175 210 300 I 176 – 185 230 355 J 186 – 200 270 500 K* 201 – 225 295 650 L 226 – 255 500 885 M Over 255 515 1,120
*includes cars emitting over 225g/km that were registered before 23 March 2006.
Income tax and personal savings
2016/17 2015/16 Basic rate band – income up to £32,000 £31,785 Starting rate for savings income *0% *0% Basic rate 20% 20% Dividend ordinary rate **7.5% 0% Higher rate – income over £32,000 £31,785 Higher rate 40% 40% Dividend upper rate **32.5% 25% Additional rate – income over £150,000 £150,000 Additional rate 45% 45% Dividend additional rate **38.1% 30.6% Starting rate limit (savings income) *£5,000 *£5,000
For 2016/17, Scottish taxpayers are effectively subject to the same income tax rates as the rest of the UK.
*If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate limit for savings will not be available for savings income. For 2016/17, £1,000 of savings income for basic rate taxpayers (£500 for higher rate) may be tax-free. **For 2016/17 the first £5,000 of dividends are tax-free.
The Government has announced an increase in the basic rate limit for the 2017/18 tax year from £32,400 to £33,500. As a result, the higher rate threshold will be £45,000 in 2017/18.
Personal allowances (PA)
2016/17 2015/16 Born after 5 April 1938 £11,000 £10,600 Born before 6 April 1938 *£11,000 *£10,660
Married couple’s allowance (MCA)
2016/17 2015/16 Either partner born before 6 April 1935
(relief given at 10%)
Transferable Tax Allowance (‘Marriage Allowance’)
2016/17 2015/16 For certain married couples (relief given at 20%) £1,100 £1,060
*Allowances are reduced by £1 for every £2 that adjusted net income exceeds £27,700 to a minimum PA of £11,000 (£10,600) and to a minimum MCA of £3,220.
Where adjusted net income exceeds £100,000, PA is reduced in the same way until it is nil regardless of the individual’s date of birth.
The Government has committed to raise the PA to £12,500 by the end of this Parliament, and to increase it to £11,500 for 2017/18.
2016/17 2015/16 Venture Capital Trust up to £200,000 £200,000 Enterprise Investment Scheme up to £1,000,000 £1,000,000 Seed Enterprise Investment Scheme up to £100,000 £100,000 Social Investment Tax Relief up to £1,000,000 £1,000,000
From April 2017, the Budget introduces two new £1,000 allowances for property and trading income.
Individuals with property income or trading income below the level of allowance will no longer need to declare or pay tax on that income.
Those with relevant incomes above £1,000 can benefit by simply deducting the allowance instead of calculating their exact expenses.
Individual Savings Accounts (ISAs) and Child Trust Funds (CTFs)
Overall Investment limit £15,240 Junior ISA and Child Trust Fund limit £4,080
With effect from 6 April 2017, the ISA annual allowance will increase from £15,240 to £20,000.
The Government will legislate to allow the ISA savings of a deceased person to continue to benefit from tax advantages during the administration of their estate and will set out further plans for introducing this measure in 2016.
From 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the Government for every pound they put in, up to the age of 50.
Funds can be used to save for a first home or for retirement. Features include:
- both the savings and Government bonus can be used towards a deposit on a first home, worth up to £450,000
- accounts are limited to one per person rather than one per home – so two first-time buyers can both receive a bonus when buying together
- during the 2017/18 tax year, those that have a Help to Buy: ISA can transfer the savings into the Lifetime ISA, or continue saving into both, but will only be able to use the bonus from one to buy a house
- after their 60th birthday savers can withdraw the savings, tax-free
- savers can withdraw money at any time before their 60th birthday for any purpose, but the Government bonus, together with any interest or growth thereon will be lost. A 5% charge will also be payable.
The Government will increase the existing £150 income tax and national insurance relief for employer arranged pension advice to £500.
Where a serious ill-health lump sum is paid to an individual who has reached age 75, it will be taxable at that individual’s marginal rate rather than at a flat rate of 45%.
A change is to be made to align the tax treatment of a charity lump sum death benefit after a member has died under the age of 75, whether paid out of drawdown pension funds and flexi-access drawdown funds or out of funds that have not been accessed (uncrystallised funds).
The Scottish rate of income tax (SRIT)
Under the Scotland Act 2012, with effect from 6 April 2016 the Scottish Parliament has the power to set a separate annual rate of income tax for Scottish taxpayers. The new regime means that taxpayers who are deemed to be resident in Scotland will effectively pay two types of income tax on their non-savings income, with the main UK rates of income tax being reduced by 10p for Scottish taxpayers, and the Scottish Parliament levying the SRIT in its place.
In its draft Budget in December 2015, the Scottish government announced that the new SRIT will be set at 10p in the pound for 2016/17. However, while the overall rates of tax paid by Scottish taxpayers remain unchanged for the coming year, the new rules will affect many employers and employees. Any employer in the UK, even those based outside Scotland, will see a change to PAYE procedures if a single one of their employees is classed as a Scottish taxpayer for the purposes of SRIT.
A new ‘S’ prefix will be added to the tax code of Scottish taxpayers, and payroll software will need to apply the correct rates of SRIT. However, employers should not use an ‘S’ tax code until advised to do so by HMRC. There is no requirement to identify the SRIT proportion of tax on the P60, but the P60 should show a Scottish tax code where relevant.
Value Added Tax (VAT)
From 1 April 2016 Standard rate 20% VAT fraction 1/6 Reduced rate 5% Current Turnover Limits Registration – last 12 months or next 30 days over £83,000 from 1 April 2016 Deregistration – next 12 months under £81,000 from 1 April 2016 Annual and Cash Accounting Scheme £1,350,000 Flat Rate Scheme
With effect from 21 March 2016 the following duty rates will be frozen in cash terms this year:
- duty rates on beer
- duty rates on spirits and other drinks above 22% alcohol by volume (abv)
- duty rates on still cider and lower strength sparkling cider.
The duty rates on wine and made-wine at or below 22% abv, and high strength sparkling cider above 5.5% abv will rise by RPI inflation from 21 March 2016.
With effect from 6pm on 16 March 2016, the hand-rolling tobacco duty rate is increased by 5% above RPI inflation this year. This is an additional 3% rise above the tobacco duty escalator which, as announced at Budget 2014, will continue until the end of this Parliament.
The main rate of fuel duty for petrol and diesel will remain frozen at 57.95p per litre in 2016/17.
Stamp duty land tax (SDLT) for non-residential property
Changes take effect on and after 17 March 2016 for purchasers of non-residential property with an upfront payment worth more than £150,000 or a lease net present value (NPV) of more than £5m. These measures do not apply in Scotland.
The measure changes the rules for calculating the SDLT charged on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties. At present, for purchases of freehold, the assignment of an existing lease and for the upfront payment (premium) on a new leasehold transaction, SDLT is charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price falls.
On and after 17 March 2016, SDLT will be charged at each rate on the portion of the purchase price which falls within each rate band. The new rates and thresholds for freehold purchases and lease premiums are:
Transaction Value Band Rate £0 – £150,000 0% £150,001 – £250,000 2% £250,000 + 5%
For new leasehold transactions, SDLT is already charged at each rate on the portion of the NPV of the rent which falls within each band. On and after 17 March 2016 a new 2% rate for rent paid under a non-residential lease will be introduced where the NPV of the rent is above £5m. The new rates bands and thresholds for rent paid under a lease are:
NPV of rent Rate £0 – £150,000 0% £150,001 – £5,000,000 1% £5,000,000 + 2%
SDLT: higher rates on purchases of additional residential properties
From 1 April 2016 changes will apply to individuals purchasing a residential property in England, Wales and Northern Ireland who, at the end of the day of the transaction, own two or more residential properties and are not replacing a main residence. Companies and other non-natural persons purchasing residential property will also be subject to the higher rates, including the first purchase of a residential property in England, Wales and Northern Ireland. The higher rates will be three percentage points above the current SDLT rates, as follows:
Threshold Existing SDLT rates New additional property SDLT rates £0 – £125,000 0% 3% £125,000 – £250,000 2% 5% £250,000 – £925,000 5% 8% £925,000 – £1,500,000 10% 13% £1,500,000 + 12% 15%
A similar levy will apply to the Land and Buildings Transaction Tax in Scotland.
Capital gains tax (CGT)
On chargeable gains 2016/17 Total taxable income and gains Up to £32,000 10% From £32,001 20% Trust rate 20%
Annual exempt amount – individuals £11,100 and most trustees £5,550.
Budget 2016 announces that, from 6 April 2016, the higher rate of CGT will be reduced from 28% to 20%, and the basic rate from 18% to 10%.
There will be an eight percentage point surcharge on these new rates for carried interest and for gains on residential property. Private Residence Relief will continue to ensure that an individual’s main home is not subject to CGT.
Employee Shareholder Status (ESS)
Budget 2016 introduces an individual lifetime limit of £100,000 on gains eligible for CGT exemption through ESS. This limit will apply to arrangements entered into on or after 17 March 2016, and will not apply to arrangements already in place.
Entrepreneurs’ relief (ER)
Qualifying gains will be taxed at 10%. Claims may be made on more than one occasion up to a ‘lifetime’ total of £10m.
ER will be extended to external long term individual investors in unlisted companies, providing a 10% CGT rate for gains accruing on the disposal of newly issued shares in unlisted companies purchased on or after 17 March 2016. This new investors’ relief is subject to the shares being held for a minimum of three years from 6 April 2016, and a separate lifetime limit of £10m of gains.
Goodwill on incorporation
The Government will allow ER to be claimed, subject to certain conditions, on gains on the goodwill of a business when that business is transferred to a company controlled by five or fewer persons or by its directors. These changes will take effect for disposals made on or after 3 December 2014.
There are to be changes to the availability of ER on associated disposals which will be backdated with effect from 18 March 2015. The changes allow ER to be claimed on an ‘associated disposal’ of a privately-held asset when the accompanying disposal of business assets is to a family member. Relief can also be claimed in some cases where the disposal of business assets does not meet the present 5% minimum size condition.
Joint ventures and partnerships
Changes to the definition of a ‘trading company’ and a ‘trading group’ for ER purposes are to be introduced and will apply to disposals on or after 18 March 2015. Where the new definitions apply, a fraction of the activities of a joint venture company will be treated as carried on by a company which holds shares in the joint venture company. Similarly, where the new definitions apply, trading activities of a company in its capacity as a partner in a firm will be taken into account in deciding whether the company is a trading company for ER purposes.
Property: Finance costs
Legislation will be introduced in Finance Bill 2016 to clarify that the basic rate tax reduction is available to beneficiaries of deceased persons’ estates. It will also ensure that the basic rate reduction applies and is calculated as intended.
National Minimum Wage and National Living Wage
From 1 April 2016, the new National Living Wage (NLW) will be introduced for workers aged 25 and above, in the form of a premium on top of the existing National Minimum Wage (NMW). Initially set at £7.20, the NLW is expected to rise to over £9 by 2020. A new NMW rate comes into effect on 1 October each year and will continue to apply for those aged under 25. The table below shows the NMW and NLW rates applying from 1 April 2016.
Apprentices* 16 and 17 18–20 21 – 24 25 and over National Minimum Wage £3.30 £3.87 £5.30 £6.70 – National Living Wage – – – – £7.20
The Government has also announced an increase in the NMW from 1 October 2016, as follows:
Apprentices* 16 and 17 18–20 21 – 24 National Minimum Wage £3.40 £4.00 £5.55 £6.95
*Rate applies to apprentices under 19, or those 19 and over in the first year of apprenticeship.
The NMW and NLW cycles will be aligned with effect from April 2017 so that both rates are amended in April each year.
Other measures announced
Real time collection of tax on benefits in kind: voluntary payrolling
Measures will be introduced to extend the voluntary payrolling framework to allow employers to account for tax on non-cash vouchers and credit tokens in real time from 6 April 2017.
As announced at the Autumn Statement 2015, an apprenticeship levy will be introduced in April 2017. It was announced in the Budget that from April 2017, employers will receive a 10% top-up to their monthly levy contributions in England and this will be available for them to spend on apprenticeship training through their digital account.
Following the business rates review, the Government has announced that from 1 April 2017 it will permanently double Small Business Rate Relief in England from 50% to 100%. It will also increase the thresholds so that businesses with a property with a rateable value of £12,000 and below will receive 100% relief, while businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief.
Museums and galleries tax relief
A new tax relief for museums and galleries will be introduced from 1 April 2017 following a consultation over Summer 2016. The relief will be available fotemporary and touring exhibition costs.
Soft drinks industry levy
A new soft drinks industry levy will be introduced, to be paid by producers and importers of soft drinks that contain added sugar. The levy will be charged on volumes according to total sugar content, with a main rate charge for drinks containing above five grams of sugar per 100 millilitres and a higher rate for drinks with more than eight grams of sugar per 100 millilitres. There will be an exclusion for small operators. Following consultation, legislation will be introduced in Finance Bill 2017 and implemented from April 2018.
Insurance Premium Tax (IPT)
The standard rate of IPT will be increased from 9.5% to 10% with effect from 1 October 2016.
Petroleum Revenue Tax
The Government will permanently reduce the rate of Petroleum Revenue Tax from 35% to 0%, taking effect for chargeable periods ending after 31 December 2015.