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

 

The number of buy to let landlords has increased in recent years and inevitably this has attracted the attention of HMRC. George Osborne has announced a number of changes that will increase the tax paid by landlords.

From April 2016 there will be a 3% surcharge on stamp duty land tax payable by anyone buying second or subsequent properties. This increase in costs may deter some prospective buy to let landlords.

There will also be a restriction on the ability to offset mortgage interest. By 2020 landlords will only be able to offset mortgage interest at the basic rate of income tax. This is being introduced gradually from April 2017 so landlords need to consider how this affects their tax position.

Higher rate tax payers will pay more tax as the relief for finance costs will be restricted to the 20% rate. Even basic rate taxpayers may be affected as the interest charge will be excluded when calculating the taxable income, so anyone near the basic rate tax limit may find that they will exceed the limit and have some of their income taxed at the higher rate.

There are also going to be changes to the reporting and payment dates of capital gains tax (CGT) on the sale of residential properties. CGT is currently reported on the annual tax return but as part of the change from personal to digital tax accounts from April 2019 the capital gain will have to be declared and paid within 30 days of the property sale.

Landlords should therefore take advice about their future plans.