Budget 2016

Chancellor George Osborne delivered his eight Budget to The House of Commons, reporting on ‘an economy set to grow faster than any other major advanced economy in the world’ and naming it a ‘Budget for the long term’ but warning that ‘the storm clouds are gathering again’.  The chancellor remains on course to achieve a budget additional of £10.4bn in 2019/20 declaring that the British economy is ‘fit for the future’.

Towards the end of last year, the government issued the majority of the clauses, in draft, of Finance Bill 2016.  Publication of draft Finance Bill clauses is now an established way in which tax policy is developed, communicated and legislated.

Our summary focuses on the issues likely to affect you and your business.

Business Announcements

From 1^st April 2017, 600,000 small businesses won't pay business rates due to the changes made to the system.  The government will permanently double the small business rate relief in England from 50% to 100%.  At the same time, they will raise the small business rate relief threshold in England, business with a property with a rateable value of £12,000 or less will receive 100% relief, while businesses with a rateable value between £12,000 and £15,000 will receive tapered relief.

Corporation Tax

The rate of corporation tax will reduce to 17% for the financial year commencing 1 April 2020. The planned reduction in corporation tax to 19% from 1 April 2017 remains unchanged.

Corporation tax reform of loss relief

From 1 April 2017, companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. If a group, the £5 million allowance will apply per group. With respect to the current streaming rules, the use of losses arising on or after 1 April 2017 will be more flexible, so that the losses will be usable, when carried forward, against profits from other income streams or other companies within a group.

Class 2 NICs for Self Employed Persons

At present a self-employed person in business is required to pay class 2 NI contributions if their profit is over the small profits threshold.  From April 2018, class 2 NIC’s will be abolished and only class 4 NICs will be payable.

Employment allowance

This will continue into the 2016/2017 tax year, and notification is to be done the same way as previous tax years, with it being sent by RTI to the HMRC.  With this being the case, this is the biggest change that I, as an Employer noticed.  Previously if you met the specific criteria to become eligible for Employment allowance you as an Employer could reclaim up to £2000 of your employer’s national insurance bill. There are certain organisations (mainly those in the public service or supplying services to public service organisations) that cannot claim the allowance, if this applies to your organisation you can visit www.gov.uk/employment-allowance to see what can be done.

 Effective from the 6^th April 2016 this is due to increase by a further £1000, allowing employers the right to claim up to £3000.  This extra allowance will be a great help to small and micro employers, not only because of the monetary value but allowing the opportunity to grow and potentially hire new staff.

TAX

There have been some slight changes to tax codes and the bandwidths in the new year, these are as follows;

• Codes with a suffix of L will be increased by 40 points.
• Codes with a suffix of M will be increased by 44 points
• Codes with a suffix of N will be increased by 36 points
• The emergency tax code will be 1100L

All of these changes will take place in the 2016/17 tax year effective from the 6^th April unless a coding notice has been sent by the HMRC.   Unfortunately, most of the bandwidths are to remain the same apart from the basic rate, this will increase by £215.  Below is a table so it’s easier for you to see these changes.

Basic Rate (20%)	£1 to £32,000
Higher Rate (40%)	£32,001 TO £150,000
Additional Rate (45%)	£150,001 above

Scottish Rate of Income Tax (SRIT) In December, the Scottish Government chose not to vary the rate of SRIT to match that of the UK rate, therefore it will remain the same.

NIC

The only change to NIC is the Upper Earnings Limit where we can see another increase;

Lower Earnings Limit	£112 a week
Primary Threshold	£115 a week
Secondary Threshold	£156 a week
Upper Earnings Limit	£827 a week

The Biggest change to National Insurance this tax year is the government backing and promoting apprentice schemes in the UK.  With this being the case from 2016/2017 exemption to employer’s NIC for apprentices under the age of 25 is coming into effect.

This will be very similar to the NIC scheme for employees under 21 which they brought into effect last tax year, with the exemption only applying to earnings up to the upper earnings limit of £827 per week.

Statutory Payments

All the statutory rates remain the same and to qualify you still have to earn over the LEL of £112 weekly. I am a little surprised that they have stayed the same as we do normally see a slight increase each year, these are as follows;

• Statutory Sick Pay-standard rate per week £88.45
• Statutory Paternity Pay-standard rate per week £139.58
• Statutory Maternity Pay-standard rate per week £139.58

Cessation of Contracted-out National Insurance Contributions

For companies with employees in occupational pension schemes where NIC is collected through contracted out NIC tables, mainly table D.  From 6^th April 2016 these tables will no longer be in use.  With this being the case, most employees will be switched from table D to table A.  The effect this will have on your employees, will be a higher employee contribution.  This is because under table D contributions were made at 10.6% whereas table A are made at 12%.

Student Loan

There is also changes to how student loan will be calculated this year, from 6 April 2016, there are two types of student loan repayment plans; Plan 1 and Plan 2.

For any loan repayments due to start from 6 April 2016, the SL1 notification you receive from HMRC will specify which repayment plan the employee is to be on.

Payroll Benefits

If as an employer you provide benefits in kind otherwise known as BIKs to your employees, the way you report this to the HMRC is changing. Benefits in kind can be such things like; company cars and health insurance.  You can now complete a P11D for each employee who receives one of these benefits as normal, or you can now include the cash equivalent value of the benefit in payroll and deduct the required amount of tax.

If you provide benefits in kind (BIKs) to your employees, for example company cars or health insurance, the way you report this to HMRC is changing. You can either complete a form P11D for each employee who receives a BIK, or include the cash equivalent value of the benefit in the payroll and deduct the required tax.

If you wish to record your benefits through payroll instead of completing a P11D, you must register with the HMRC Payrolling Benefits in Kind online service. To be able to do this for the 2016/2017 tax year you must register with the HMRC before the 6th April 2016.

They are the changes that we believe will affect your business, there are many more issues that were addressed, any issues or concerns over these don't hesitate to contact us.