March 2nd, 2016Budget 2016 – What may it mean for you?
On 16 March the Chancellor, George Osborne, will deliver his next Budget speech.
The recent comments about needing to increase austerity seem to indicate that this will not be a giveaway Budget.
Here’s some predictions of what might happen:
Pensions. It’s highly likely there will be some changes to the generous tax relief on saving for your pension. At the moment if a basic rate tax payer pays £80 into a pension the Government tops this up to £100.
For a higher rate tax payer they only need to pay £60 (after tax relief) for a gross contribution of £100.
It is now widely predicted that a new flat rate will be introduced for everybody. For this to be tax neutral the rate would need to be 33% but it’s expected that Chancellor won’t miss the opportunity of a tax grab by setting a rate of 25%.
It is also possible that the current 25% tax free you are allowed to take when you start with drawing your pension may see some changes.
If you are considering making additional pension contributions this year then don’t wait until Budget day
Landlords. Landlords have had a bit of a kicking in recent Budgets so we are not expecting any major changes here.
One change we may see would affect rental properties being held in a limited company.
A landlord operating through a limited company gets tax relief for their interest payments whilst a landlord operating outside of a limited company can’t.
This anomaly could be addressed by limiting interest deductions for property companies or by changes to the ATED rules (Annual Charge on Enveloped Dwellings)
Landlords should continue to watch the Budget closely
Higher rate tax band. This is set to increase to £43,000 and the Chancellor has indicated he would like this to increase, eventually, to £50,000. It does seem a little early in this term of office to be so generous but the Government may seek to reassure its core voters with some positive moves prior to the European referendum. We may therefore see a bigger increase than expected towards the target of £50,000.
Higher rate tax payers should keep their fingers crossed
Dividend tax. The new dividend tax comes into force on 6 April 2016 and although this has yet to bite the Chancellor should be aware that small businesses are not expecting further tax changes which could be damaging. It is thought unlikely that the Chancellor will make any real concessions though. The move to more regular reporting of all tax information could see the introduction of new reporting requirements for dividends. This would need to be implemented by a matching IT programme so it won’t be overnight.
As usual we’ll be watching the Budget – and the aftermath – closely and will keep you posted.
