As the Finance Bill 2016 has now received Royal Assent becoming the Finance Act 2016, we have listed some key facts below.
These are just a few brief notes on some of the key changes that many business owners will notice the effects of this financial year onwards.
Dividend Tax Rates
From 6 April 2016, the dividend tax credit has now been removed and instead has been replaced with a tax-free dividend allowance for the first £5,000 dividend income per yer. Dividends received above this will be tax at the following rates:
7.5% on dividend income within the basic rate band (£0-32,000)
32.5% on dividend income within the higher rate band (£32,001-150,000)
38.1% on dividend income within the additional rate band (£150,001+)
Corporation Tax Rate
The rate of corporation tax will be cut to 17% by 2020 from this years rate of 20% in an effort to encourage and support investment in UK businesses. The rate reduces to 19% in 2017 and 19% for 2018 and 2019 and finally to 17% in 2020.
Directors Loans
From April 2016, the tax charged on outstanding loans to participators has been increased to 32.5%.
Patent Box
Patent Box is a tax regime that provides for a reduced rate of corporation tax of 10% on income from the commercial exploitation of patents. The Finance Act 2016 brought in a few changes including that the profits from each income stream from patents will need to be calculated separately and that the formula used for the profit calculations will now include an extra step which is to link the benefit to the R&D activities that lead to the patents.
For investors and employees, it is also worth noting that:
Employee Shareholders
Disposals of shares awarded under an Employee Shareholder Agreement after 17 March 2016 will now be exempt from Capital Gains Tax up to an individual lifetime limit of £100,000.
Investors Relief
Investors will now pay a capital gains tax rate of 10% on eligible disposals. Eligibility is based on shares being issued after 17 March 2016, held for 3 years and neither the investor or anyone connected to them is an officer or employee of the company.
These are just a couple of brief mentions of changes introduced by the Finance Act 2016. For further information about the full scope of introductions and changes in the Finance Act 2016 you can choose to read the legislation here, or if the thought of that has already sent you to sleep you can always contact us here at Bright Horizon for advice on the changes to personal, business and corporate taxation that may affect you.