Initial Reaction to Budget 2016

Ross Martin blogs: 

In my summary of the Spending Review I noted that a 0.25% surplus projection in 2019/20 seemed a little “tight”. It will come as no surprise to anyone then that with the economy growing a little slower than expected, tax collection a little down and spending a little more, only 5 months down the line we have a fairly immediate problem to attend to.

George Osborne though hides it well, with a role that now seems more focussed on bluff and confidence management than ever before.

Reductions

In this distilled tax analysis, I would give a small “nod” to the now 3% reduction in Corporation Tax rate to 17% (although I would remind all about the corresponding increase to dividend taxation of 7.5%), the interesting Lifetime ISA, and the reduction in Capital Gains Tax (CGT) from 28% to 20%.

One should note the CGT reduction does not apply to residential property so complication remains and will most likely increase desire and opportunities to classifying income as capital for tax planning purposes.

Lifetime ISA

The Lifetime ISA has some tax relief similarities to a pension in that the Government provides a 25% top-up to savings (limited to £1,000 p.a. of course) albeit delivered in a different manner and with restrictions. (With the pre-Budget speculation surrounding removal of higher-rate tax relief on pension contributions one also wonders whether this is pre-cursor to a future attack on pensions instead).

The considerable rest of the Budget 2016 is, in my opinion, mostly voluminous “noise” to small business owners.

Ross

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