Click here to read our summary of the Chancellor’s Budget 8th July 2015
The chancellor presented an upbeat message with various interesting and helpful changes to the existing tax regime.
The projected cut in the rate of Corporation Tax to 18% in 2020 was unexpected and welcome, leaving us with a major incentive to attract foreign investment.
For manufacturers and farmers, the Annual Investment Allowance increase from its projected level of £25,000 next January to a new permanent level of £200,000 per annum is both realistic and welcome. For the remainder of the current year the allowance remains at £500,000.
Not so welcome will be the cut in tax relief for properties bought to let. Here the tax relief on mortgage interest is to be gradually cut from its present level of as high as 45% back to 20%. However this is mitigated to some extent in that we have historically low interest rates currently and probably for the foreseeable future. An interesting change to property rentals is the end of the 10% depreciation allowance on furnishings, to be replaced by relief limited to the actual cost of replacement items – generally not nearly so generous. All calculated to take some of the heat out of the London property market no doubt.
The ending of tax relief on the purchase of goodwill where a company buys another business might have been expected as the government took steps recently to curtail tax relief on goodwill. Apparently goodwill is too much of a good thing.
The attractions of incorporating an existing business have been somewhat reduced by the changed tax regime on dividends – formerly an attractive way of withdrawing money from a company due to the lack of NIC on dividends. The government appears to be attempting to tackle the IR35 problem again. This is where people who would otherwise be considered employees set up a limited company and have their income paid into the company to be extracted in a more tax friendly fashion.
I hope you find it interesting and useful.
Please get in touch if I can help further.
Best wishes,
John