The Budget proved something of a mixed blessing for UK businesses. The headline rate of corporation tax will be reduced from its current level of 20% to 17% by 2020. Smaller firms received good news on business rates: from April 2017, 250,000 smaller businesses will have their rates cut, while 600,000 small companies will pay no rates at all.
However, the Budget provided a few stings for larger UK companies, particularly for drinks manufacturers and insurers. The Chancellor increased the standard rate of insurance premium tax from 9.5% to 10%, and unveiled a levy on the total sugar content of soft drinks that is expected to raise £520 million from April 2018. He also tightened up tax loopholes used by some multinational companies when carrying forward losses or deducting interest. Elsewhere, in a bid to support the struggling energy sector, he halved the supplementary charge for oil and gas producers from 20% to 10%, and effectively scrapped the Petroleum Revenue Tax.
Savers received good news as the Chancellor announced an increase in the annual Individual Savings Account (ISA) allowance from £15,240 in April 2016 to £20,000 from April 2017. He also revealed the introduction of a new “Lifetime ISA” specifically aimed at those aged below 40. Individuals can save up to £4,000 each year towards a deposit on their first home or their retirement and, for every pound they save, the government will contribute a bonus of 25%.
Lower-paid workers are also set to benefit from a new “Help to Save” scheme that will provide a 50% government top-up on up to £50-worth of monthly savings. People can save up to £2,400, receiving a maximum bonus of £1,200.
The Chancellor increased the threshold at which individuals will begin paying income tax at 40% from £42,385 to £45,000 from April 2017. He also raised the tax-free personal allowance from £11,000 in April 2016 to £11,500 in April 2017. Capital gains tax (CGT) also came under scrutiny: the higher rate of CGT will be cut from 28% to 20% from April 2016, and the basic rate will fall from 18% to 10%.
The Confederation of British Industry (CBI) welcomed the Budget as “a stable Budget for business facing stormy waters” but expressed disappointment that, in an environment of weak productivity growth, there were “no further measures to support innovation and R&D”. Meanwhile, the British Chambers of Commerce (BCC) welcomed the Budget as “steady (and) workmanlike”, but urged the Chancellor to tackle the “deep-rooted productivity problems in the UK economy”.
