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What the March 2016 budget means for you and your business

George Osborne delivered his budget to Parliament on 16 March and, while most headlines were grabbed by the proposed tax on sugary drinks, several other changes were announced that will have a direct impact on both personal and commercial accounting and tax management. Here are some of the headlines.

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A surplus by 2019-20

According to Osborne, the UK deficit will have been cut by almost two thirds from its peak this year, thanks to a further £3.5 billion of savings from departmental spending over the next four years. The government also predicts a surplus (where more tax is raised than spent) of £10.4bn in 2019-20. An efficiency review will inform future spending.

Lifetime ISA

A new lifetime ISA will be available from April 2017 to any adult under 40 wanting to save for a new home, or to put towards retirement. Savers will be able to put away up to £4,000 per year and will receive a 25% bonus from the government on this money. The total amount that savers can invest across all ISAs will also increase to £20,000 from April 2017. ISAs represent safe, tax-efficient saving, and are easy to set up and maintain.

Tax allowances

While on the subject of tax, personal tax allowance will increase to £11,500 in April 2017 (£11,000 from this April), with the higher rate threshold rising to £45,000. Two new tax-free £1,000 allowances will also begin in April 2017; one for selling goods or providing services and the other for income from property you own. The first £1,000 earned directly from property, such as renting a driveway or loft storage will be tax free.

National Insurance contributions (NICs)

Self-employed people currently pay Class 2 NICs at £2.80 per week if they make a profit of more than £5,965 per year, plus Class 4 NICs if over £8,060. From April 2018, however, they will only have to pay Class 4 NICs, as Class 2 will be scrapped. There will be reformed provision for Class 4 payers to build their entitlement to the state pension and other contributory benefits.

Business matters

Business rates will be reduced to zero for small businesses occupying property with a rateable value of £12,000 or less – this doubles the current cut-off figure of £6,000. A tapered rate of relief will also stand on properties worth up to £15,000. This change will see around 600,000 businesses excused from paying business rates altogether. In addition, the main rate of corporation tax will be cut to 17% by April 2020, benefitting more than one million businesses.

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