CHELTENHAM CHAMBER OF COMMERCE’S RESPONSE TO THE BUDGET
Chamber member and Finance spokesperson, Mark Hunt of Crowe Clark Whitehill gave the Cheltenham Chamber of Commerce’s response to the budget which contains both good and bad points for local businesses.
The Chancellor is looking to support investment and growth. However, property investors and shareholders may face some pain.
The corporation tax rates of 19% in 2017 and 18% in 2020 will reduce tax bills for over a million businesses which is good news. Further measures promoting the UK for business are:
• a permanent annual investment allowance of £200,000 from January 2016, giving 100% tax relief for qualifying purchases
• an increase in employment allowance to £3,000, giving a further £1,000 in employer national insurance savings.
However, for residential property investors mortgage interest relief for buy-to-let properties will be restricted and the wear and tear allowance will be withdrawn.
Changes to taxation of dividends will see the effective rate of tax on dividends increase by 7.5%. Owners of businesses will therefore see their annual tax bill increase, although the first £5,000 of dividends are to be tax free for all taxpayers. Furthermore a pledge to replace the minimum wage with a ‘living wage’ will place additional pressure on some businesses.
The outcome of the tax changes for companies will mean it becomes more expensive for shareholders to extract profits, notwithstanding the proposed reduction in corporation tax. A company will therefore continue to be the best structure for those wishing to invest and grow.
In a surprise announcement, tax relief for the purchase of goodwill will be completely withdrawn from today, increasing effective costs of acquisition."