Nigel Syson, Head of Corporate Tax for Haines Watts East gives his overview of the recent budget and how it will impact owner-managed businesses
GEORGE Osborne’s eighth budget was essentially a ‘steady as we go’ affair with assistance for owner managed businesses and the squeezed middle.
Nigel Syson, Head of Corporate Tax for Haines Watts East gives his overview of the recent budget and how it will impact owner-managed businesses
GEORGE Osborne’s eighth budget was essentially a ‘steady as we go’ affair with assistance for owner managed businesses and the squeezed middle.
Company owners will welcome the continued reduction of corporation tax rates to 17 per cent as another one per cent is shaved off corporation tax rates from April 2020. This reduction in rates continues to make UK Plc competitive and in particular we are now only a few percentage points behind the Republic of Ireland.
Hopefully, this competitive measure will not fall foul of perceived unfair tax competition by Brussels!
This reduction in corporation tax is to be paid for by a tightening up of the rules for the payment of corporation tax by larger companies and anti-avoidance changes aimed at the large multi-nationals.
However, not everything is rosy for owner managers. Those who borrow from their company will be hit hard by an increase to 32.5 per cent in the rate of tax charged on company loans to shareholders in respect of loans and advances on or after 6 April 2016. This also comes at the same time as dividend tax changes, which take effect from the same date, and will also hit business owners hard. This reflects HMRC’s moral view on those owners who borrow from their businesses.
The marginal increase in the tax free allowance and tax rate threshold are a welcome boost for business owners and family members employed within the business. Regrettably, for those more successful business owners who can generate incomes over £100k, there has been no movement in the effective 60 per cent rate between £100k and £121k, another missed opportunity perhaps towards simplifying the tax system.
The reduction in capital gains tax rates by the Chancellor to 20 per cent and 10 per cent for all assets other than residential property, represents an attempt to maximise the tax take by setting the tax rate at a level most likely to deliver the maximum return to government. This is a practical approach to a tax whose tax point is determined at the point at which the taxpayer sells an asset.
The reduction in business rates addresses a real concern of small businesses particularly those on the high street who are facing severe online competition. Given that small businesses are the life blood of the economy it is important that business rates are affordable and not a dis-proportionate cost for businesses.
After much press speculation, and stress for financial advisers and taxpayers alike, the Chancellor decided to leave the tax free pension lump sum alone and not reduce the tax relief on pensions contributions. This is to be welcomed as the constant changes to the tax treatment of pension schemes has done much to reduce confidence in the pension system
All in all, a relatively unexciting budget with a few rewards for owner managed businesses and middle earners but the jury is still out on its impact on the economy.
A Budget for owner managers
Nigel Syson, Head of Corporate Tax for Haines Watts East gives his overview of the recent budget and how it will impact owner-managed businesses
GEORGE Osborne’s eighth budget was essentially a ‘steady as we go’ affair with assistance for owner managed businesses and the squeezed middle.
Company owners will welcome the continued reduction of corporation tax rates to 17 per cent as another one per cent is shaved off corporation tax rates from April 2020. This reduction in rates continues to make UK Plc competitive and in particular we are now only a few percentage points behind the Republic of Ireland.
Hopefully, this competitive measure will not fall foul of perceived unfair tax competition by Brussels!
This reduction in corporation tax is to be paid for by a tightening up of the rules for the payment of corporation tax by larger companies and anti-avoidance changes aimed at the large multi-nationals.
However, not everything is rosy for owner managers. Those who borrow from their company will be hit hard by an increase to 32.5 per cent in the rate of tax charged on company loans to shareholders in respect of loans and advances on or after 6 April 2016. This also comes at the same time as dividend tax changes, which take effect from the same date, and will also hit business owners hard. This reflects HMRC’s moral view on those owners who borrow from their businesses.
The marginal increase in the tax free allowance and tax rate threshold are a welcome boost for business owners and family members employed within the business. Regrettably, for those more successful business owners who can generate incomes over £100k, there has been no movement in the effective 60 per cent rate between £100k and £121k, another missed opportunity perhaps towards simplifying the tax system.
The reduction in capital gains tax rates by the Chancellor to 20 per cent and 10 per cent for all assets other than residential property, represents an attempt to maximise the tax take by setting the tax rate at a level most likely to deliver the maximum return to government. This is a practical approach to a tax whose tax point is determined at the point at which the taxpayer sells an asset.
The reduction in business rates addresses a real concern of small businesses particularly those on the high street who are facing severe online competition. Given that small businesses are the life blood of the economy it is important that business rates are affordable and not a dis-proportionate cost for businesses.
After much press speculation, and stress for financial advisers and taxpayers alike, the Chancellor decided to leave the tax free pension lump sum alone and not reduce the tax relief on pensions contributions. This is to be welcomed as the constant changes to the tax treatment of pension schemes has done much to reduce confidence in the pension system
All in all, a relatively unexciting budget with a few rewards for owner managed businesses and middle earners but the jury is still out on its impact on the economy.