Chancellor George Osborne announced a number of measures in his Budget that will have a significant impact on both large and smaller businesses.
He promised to collect more tax from huge multi-national companies to help fund tax cuts for small and medium-sized enterprises.
The main changes include cuts in Corporation Tax, Capital Gains Tax, Business Rates and Stamp Duty on commercial properties.
Mr Osborne said he welcomed multi-nationals investing in Britain but stressed that they would have to pay their fair share of tax. He said: “Some multinationals deliberately over-borrow in the UK to fund activities abroad, and then deduct the interest bills against their UK profits.”
He announced a series of measures to restrict their ability to reduce their tax burden, which he said would raise an extra £9 billion revenue for the Exchequer.
Mr Osborne said: “Everything we collect from the largest firms who are trying to pay no tax will be used to help millions of firms who pay their fair share of tax.”
He then went on to announce a reduction in the higher rate of Capital Gains Tax (CGT) from 28% to 20%, effective from 6 April 2016. The basic rate is reduced from 18% to 10%. However, the reductions do not apply to additional residential properties. They will be taxed at an 8 percentage point surcharge above the higher and basic rates.
CGT does not apply to a person’s main home; only to additional properties.
Mr Osborne also announced that Corporation Tax would be cut from 20% to 17% in 2020.
The way Stamp Duty is calculated on freehold commercial property and leasehold premium transactions is also changing. Previously, these rates applied to the whole transaction value.
From 17 March 2016, the rates apply to the value of the property over each tax band.
The new rates and tax bands are 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.
Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.
Stamp duty rates for leasehold rent transactions has also changed, with a new 2% stamp duty rate on leases with a net value over £5m.
But to let landlords were also affected by the Budget. Last autumn, Mr Osborne announced that from this April onwards, 3% would be added to Stamp Duty on all second homes and additional properties.
In his Budget speech he confirmed that this increase would go ahead and there would be no exemptions for investors who felt the move impacted unfairly on them.
Mr Osborne also announced that the new threshold for small business rate relief will rise from £6,000 to a maximum threshold of £15,000.
“I’m also going to raise the threshold for the higher rate from £18,000 to £51,000. From April next year, 600,000 small businesses will pay no business rates at all. That’s an annual saving for them of up to nearly £6,000 – forever.”
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