Except where stated, these measures apply for the current tax year and already have legal effect under the Provisional Collection of Taxes Act. We will see the first effects of Theresa May's new regime in Philip Hammond's Autumn Statement on 23 November.
Income tax rates remain at 20%, 40% and 45%, with modest increases in both the personal allowance (to £11,500) and basic rate limit (£33,500 being taxable at 20%).
Generally, capital gains tax is reduced to 20% (from 28%). Investors in private companies can access a lower 10% rate of CGT (in a similar way to employee-owners who have 'entrepreneur's relief').
Corporation tax remains at the record low flat rate of 20% with the ambition to reduce this to 17% (although we need to see how feasible this is to achieve in practice under the new regime which may have other priorities).
The tax treatment of peer-to-peer loans has been considerably simplified, a matter on which we have previously commented.
How are lower headline rates of tax paid for? In part by 'stealth taxes'.
Insurance premium tax crept up again to 10% (from 1 October 2016).
Income tax on dividends has been effectively increased on dividends received (on shares not held in an ISA or pension) over a statutory tax-free limit of £5,000 per year. This affects in particular business owners who draw their personal income mainly in the form of dividends.
The new higher rates of SDLT are in place - while much of the headlines were on the 3% 'buy to let surcharge', the near-doubling of SDLT on high-value commercial lease rents will be of equal significance for the wider economy, discouraging business upsizing.
The Apprenticeship Levy, at 0.5% of a wage bill, will be payable on employers' pay bills (as a group) above £3m. The government is pressing ahead with plans to introduce this from April 2017, although it is not at all clear that IT systems for the voucher scheme will be properly in place on time. It may also skew the hiring practices of large employers for entry-level employees away from graduates onto 18 year olds with A levels, so that levy funds can be used on their training.
There are significant changes to the treatment of expenses of contractors/employees engaged through agencies and other intermediaries. HMRC are making it increasingly difficult to claim travel and subsistence expenses where only one job is worked at a time. There are also potential reporting and even liability shifting measures where an employer does not provide the intermediary with accurate information as to the nature of the role the worker is undertaking.
Reasonably complex rules have been established with the intention of preventing small business owners liquidating their companies, with the benefit of extraction of retained profits at the 10% CGT rate, and re-establishing similar operations (whether as a company or sole trader). These rules mean that any company owner should be carefully advised on the effects of a solvent liquidation, to ensure that it does not prevent (or make more expensive) any future plans they may have.
If you have any questions on how the measures in the Finance Bill 2016 affect your business, please contact a member of the DWF Tax Team