The Budget 2016, What Does it Mean for Employers?

The Budget 2016, What Does it Mean for Employers?

What The 2016 Budget Means For Employers

After a range of new measures affecting employers were announced in the 2016 Budget, many smaller companies welcomed the announcements, while larger companies were less keen on the Chancellor’s plans.

The most startling announcement was that the threshold for small businesses rate relief is to rise from £6,000 to £15,000 from April 2017. This will mean that any company whose property has a rateable value of £15,000 or less will not need to pay any business rates. Higher rate relief will increase from £18,000 to £51,000. Future changes to the rate relief thresholds will now be linked to the Retail Price Index, rather than the Consumer Price Index.

A new system of stamp duty was introduced with immediate effect following the speech. The first £150,000 of a commercial property purchase will be free from stamp duty, then 2% will be charged on the next £100,000 and 5% on the amount above £250,000. The Government says 90% of companies will pay the same level of duty, or less, under the new system.

Restrictions were imposed on the ability of larger companies to cut corporation tax payments by making use of debt interest payments – these have been capped at 30%. Another restriction to corporation tax will affect companies with an annual profit of over £5 million, who will see the level of past losses they can carry forward in order to offset their corporation tax bill capped at 50% of current profits.

The Government had already announced plans to cut the headline rate of corporation tax from the current level of 20% to 18%. Now it will reduce to 17% by 2020. Many business leaders suggested that for larger companies this tax cut would not be sufficient to offset the costs incurred via the other measures that were announced.

Carolyn Fairbairn, the director general of employers’ organisation the Confederation of British Industry, said:

“The reduction in the headline corporation tax rate sends out a strong signal that the UK is open for global business investment”, before adding:

“Changes to the tax treatment of losses will make it harder for larger scale-up firms and companies that have been through tough times to play their part in the recovery.”

Finally, the latest forecast from the Office for Budget Responsibility is for one million more jobs to be created by 2020.

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