Business lobbies campaigning hard for business rates reform are claiming victory following the announcement of reliefs and the creation of a business rates roadmap to create “a level playing field for businesses”. The chancellor announced a new £15,000 threshold for small business rate relief, more than double the previous level of £6,000. He also increased the higher rate from £18,000 to £51,000, and said the changes mean 600,000 small firms will pay no business rates at all.
Tax allowances and NICs, online allowances and higher rates
The self-employed will soon no longer have to pay class 2 national insurance contributions as it is to be abolished from April 2018. The chancellor is also raising the threshold for paying income tax to £11,500 by 2017. The threshold for paying the higher rate of tax is also to be raised, from £43,000 to £45,000 in the tax year 2017/18.
New £1,000 online allowances for people who rent out their homes and make money through sharing economy platforms are to be introduced. The chancellor said no forms or paperwork were needed but was a part of bringing the tax system into the digital age.
The chancellor announced a range of measures to stop multinational companies manipulating the complexities in the tax system and avoiding payment. However, he also announced that corporation tax was to be to cut to 17% by April 2020. The Treasury estimates this will benefit one million companies.
Capital gains tax
Osborne has cut the top rate of capital gains tax from 28% to 20% and the basic rate falls from 18% to 10%. This will not extend to residential property but will include the sale of equity in businesses. The change will be effective from the start of the new tax year in April.
No recent budget goes without mention of the chancellor’s northern powerhouse and today Osborne announced extra spending for rail and roads. He gave the go-ahead to a High Speed 3 (HS3) line between Leeds and Manchester, designed to cut journey times from 50 minutes to around 30. He also announced an extra £161m to turn the M62 into a four-lane motorway and £75m to improve other northern roads, such as the A66 and A69. The chancellor also promised an additional £700m for flood defences.
Duties and tolls
The chancellor avoided raising fuel duty and maintained freezes on alcohol. He promised to halve the tolls on the Severn river crossings and the Treasury says it will review proposals to abolish them altogether.
The chancellor has reformed stamp duty for commercial property in a similar way to how he changed the residential system in 2014. He has abolished the ‘slab system’ with a gradually applied set of thresholds more akin to other taxes, where buyers only pay a higher rate on the part of the purchase that has exceeded that threshold. From midnight tonight, there will be no commercial stamp duty paid on property purchase above £150,000. Two percent on £150,000- £250,000 and a top 5% rate thereafter. The Treasury says 90% of businesses will pay the same or less as a result of this change.
The chancellor spoke at some length of the “uncertainty in the global economy” and said the UK was growing “faster than any other advanced economy in the world”. However, he then had to tell parliament that the Office of Budget Responsibility has revised down its forecasts for the next five years. The UK economy will grow by 2% in 2016, 2.2% in 2017 and then 2.1% in the following three years, Osborne said. There was a noisy reaction from the Commons when he said these forecasts were dependent on the UK remaining in the European Union.