From April 2016 there is a new personal savings allowance which means that basic rate taxpayers can receive of £1,000 of savings income free of any tax. This is reduced to £500 for higher rate taxpayers and nothing for additional rate taxpayers.

Some people wrongly believe that savings interest is now outside tax but this is incorrect. It needs to be included in total income as this could affect whether the taxpayer is liable to basic, higher or additional tax rates.

Banks will no longer have to deduct tax at source so some clients used to getting a refund of tax deducted at source may find that they now have tax to pay instead.

If you have any queries, please contact us.

The Chancellor announced in the budget that from April 2018 the right to shared parental leave is to be extended to grandparents. This may be too late for my wife and I to help with our new grandson, Evan who joined us on 1 April, but his parents do have the option of splitting parental leave between them.

There has been recent publicity about how few fathers are taking up their option to take more than their two weeks paternity leave but this is bound to increase. Employers need to be aware of employees rights and what to do if they receive a request for shared parental leave. It is important to have an agreed policy so that all employees are treated equally and fairly.

With the exception of the new tax on sugary drinks, the 2016 budget will be remembered more for the political fall-out rather than any major new announcements.

However there are some significant developments that will affect the owners of small businesses. Last year the Chancellor announced major changes to how dividends were to be taxed and also the removal of the NIC employment allowance for director only companies. Both these changes came into force this April.

There is some good news in this budget even though some of the changes will not be introduced for several years.

• It was previously announced that corporation tax would be reduced to 19% from April 2017. This will be further reduced to 17% from April 2020.
• Income tax personal allowances are being increased to £11,00 from April 20165 and to £11,500 from April 2017. The higher rate tax threshold will therefore increase to £45,000 from April 2017.
• The national insurance employment allowance is increased to £3,000 pa from April 2016.
• The rate of tax charged on overdrawn director’s loan accounts is increased from 25% to 32.5%.
• Capital gains tax rates are to be reduced from April 2016 on gains other than those relating to residential property. The new basic rate will be 10% and the higher rate 20%.
• The 10% capital gains tax entrepreneur’s relief has previously been restricted to shareholders working in the business. This is to be extended to external investors making it more attractive to invest in small businesses.
• From April 2017 the small business rates relief is extended to all properties with a rateable value of under £12,000. There will also be tapered relief on properties with rateable values up to £15,000.
• The weekly Class 2 national insurance contributions are to be abolished from April 2018.

The Chancellor also announced an intention to further clamp down on the use of personal service companies. This will be introduced in 2017.

More information can be found on our Tax Data page