MARCH 2016 BUDGET UPDATE

FOCUS ON SMALL BUSINESSES/FREELANCERS AND CONTRACTORS

BUDGET 2016 SUMMARY
The budget was mostly positive for the majority of freelancers, contractors and small
businesses and should help alleviate the extra tax payable due to changes in dividend taxes
announced last year.
If you are interested in reading the full budget update, you can read it here:
https://www.gov.uk/government/publications/budget-2016-documents
Otherwise, here are the highlights that we think will most impact our clients in the short and
long term.
INCOME TAX
Personal Allowance
16/17 set at 11,000
17/18 due to increase to 11,500
Higher tax band
16/17 set at 43,000
17/18 due to increase to 45,000
CLASS 2 NATIONAL INSURANCE (SELF EMPLOYED)
No more Class 2 NI for the self-employed from 2018.
CORPORATION TAX
Corporation tax previously expected to drop to 18% by 2020 has now been reduced
further to 17% by 2020. It will still drop by 1% to 19% from April 2017.

MARCH 2016 BUDGET UPDATE

VAT REGISTRATION THRESHOLD

The threshold will increase to 83,000 from 82,000 from 1 April 2016.
DIRECTORS LOAN TAX
Tax directors loan balances unpaid within 9 months of the end of an accounting year
will increase from 25% to 32.5% for loans made from 2016.
CAPITAL GAINS TAX
Basic rate will reduce from 18% to 10% from 6th April 2016.
Higher rate will reduce from 28% to 20% from 6th April 2016.
This will not apply to residential property (i.e. buy to lets).
IR35
From April 2017 if you work through your own company in the public sector, the agency or
the public sector employer has to decide if IR35 applies to you or not, and deduct the
relevant tax and national insurance where necessary.
LIFETIME ISA
NEW from April 2017, the Lifetime ISA can be opened if you are under 40. You can
save up to 4000 a year until you are 50 and you will get a 25% bonus from the government.
There are tax implications depending on when you want to withdraw the cash, explained on
the HMRC website.
The general overall ISA limit will increase from April 2017 from 15,240 to 20,000.

FURTHER INFORMATION
Please contact us at info@rlkaccountancy.co.uk if you would like further information.