Budget 2016: Chancellor promotes business stability among wave of fiscal changes
Billed as the Budget to “put stability first” and back the UK’s burgeoning SME base, the latest set of fiscal policies announced by the Chancellor present a great deal of opportunity for business growth. Led by a long overdue reduction in Business Rates, extension of Entrepreneur’s Relief as well as reductions in headline rates of Capital Gains Tax and Corporation Tax, there is certainly a lot for business leaders to digest.
In an announcement which will arguably have the largest impact on business funding and widespread investment activity, the Chancellor announced an extension to Entrepreneur’s Relief. Previously, individuals were required to be employees of a firm with a stake of 5 per cent or larger in the business in order to claim their £10million lifetime allowance, which is taxed at the much reduced rate of 10 per cent. However, this is no longer the case, with this provision having been extended to all long-term investors with shares in unquoted trading companies.
This has the potential to pave the way for a new type of mainstream investment, encouraging individuals to fund small businesses, and in doing so reap the rewards of a reduced tax liability. The purchase of shares in non-listed private companies could feasibly replace the purchase of property as the sound investment of choice, with the latter now being subject to an 8 per cent CGT surcharge and increased stamp duty from April on second and rented homes.
By increasing the threshold for business rates relief from £6,000 to £15,000, as well as increasing the threshold for the higher band of Business Rates, the Chancellor has reduced business rates payable for the majority of small businesses. This will serve to increase business confidence and encourage investment in staff and the pursuit of new contracts.
Capital Gains Tax
In somewhat of a surprise announcement, the headline rate of CGT is to be reduced from 28 per cent to 20 per cent for higher rate taxpayers, and from 18 per cent to 10 per cent for lower rate taxpayers. However, an additional 8% surcharge will apply on the proceeds of residential property sales. This move is likely to cause a short-term stalling of the deals market, as many business owners hold-off on selling their assets until this change is implemented. Similarly, the surcharge payable on property investment will act to encourage individuals to hold on to their property, heating up the already simmering housing market.
The Chancellor also committed to a further reduction in Corporation Tax, with rates now due to fall to 17 per cent by 2020. While obviously a positive move for the UK’s business community, this is a clever piece of posturing by the Chancellor and serves to act as a further carrot to attract foreign firms to locate here.
Budget 2016: Business Sector Implications
Here follows a summary of the headline points for consideration from the Chancellor’s 2016 Budget for each of Menzies’ core business sectors.
Hospitality & leisure
Manufacturing & Technology
Property & construction
Retail & wholesale
Transport & logistics
For more information about Menzies LLP or to talk to us about the impact of the 2016 Budget on your business and finances, contact your Menzies Relationship Partner or contact Menzies.