In the uncertain global economic environment, the Chancellor’s deficit-reduction goals have become more challenging. But he still managed to strike an up-beat tone when delivering “a Budget that puts the next generation first”.
The interests of children were highlighted in the introduction of the new headline-grabbing sugar tax on the soft drinks industry, intended to tackle the problem of childhood obesity. This is expected to raise £520m a year, used to support sport in schools.
In a bid to encourage younger people to save for their homes or retirement, George Osborne unveiled a new Lifetime ISA for those under 40. Savers will be able to put in £4,000 a year up to age 50, with the government adding 25% on top. Older savers were also encouraged, through the raising of the annual ISA allowance to £20,000 a year from April 2017.
There were sweeteners for other taxpayers too. “We need to light the fires of enterprise,” Osborne declared. With this goal in mind, Class 2 national insurance contributions for the self-employed are to be abolished. Capital gains tax rates are to be cut, and there will be a new 10% CGT rate for individuals’ gains from long-term investments in unlisted trading companies.
Encouragement for business also came in the form of a further reduction in the corporation tax rate to 17% from April 2020. Osborne said he was aiming for “fundamental reform of the business tax system”, including a levelling of the playing field between large and small businesses. While still wanting to attract multinationals to the UK, the government will continue to close tax loopholes and introduce measures so that global businesses pay taxes here, for example, through new restrictions on interest deductibility.
Smaller businesses will receive targeted boosts through changes to commercial stamp duty rates, and an increase in the threshold for small business rate relief to £15,000. An estimated 600,000 small businesses will pay no business rates at all from next year. Micro-entrepreneurs who sell goods or rent out their homes through the Internet will benefit from a new £1,000 tax allowance – “a tax break for the digital age”.
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HMRC powers and administration
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