Finance Bill 2016 - The Highs

Lifetime ISA

£4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free. This will appear in a future Finance Bill.

Corporation tax rates

The main rate of corporation tax is currently 20% and this rate will continue for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:

19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019.
17% for the Financial Year beginning on 1 April 2020.

Corporate tax loss relief

The government will introduce two reforms to corporate tax losses from April 2017. The first is a high. Losses arising on or after 1 April 2017 will be useable, when carried forward, against profits from other income streams or other companies within a group. However a low has crept in. From 1 April 2017, companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. For groups, the £5 million allowance will apply to the group. This will appear in Finance Bill 2017.

Capital gains tax (CGT) rates

The 2015/16 rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%. The trust CGT rate will also reduce from 28% to 20%. The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief. In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies). These changes will take effect for disposals made on or after 6 April 2016.

External investors and ER

ER will be extended to external investors (other than employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions will apply:

shares must be newly issued and subscribed for by the individual for new consideration
be in an unlisted trading company, or an unlisted holding company of a trading group;
have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016;
have been held continuously for a period of three years before disposal.

An individual’s qualifying gains for investors’ relief will be subject to a lifetime cap of £10 million.

If you would like more information on any of the issues outlined above then please contact us today.