How Does The Summer Budget Affect Northern Ireland Businesses?
The Chancellor of the Exchequer, George Osborne, announced the Summer Budget on Wednesday 8 July 2015.
We have highlighted the key issues from the Summer Budget that affect Northern Ireland businesses.
Growth
Growth forecast for the next few years:
- 2.4% in 2015
- 2.3% in 2016
- 2.4% in 2017
- 2.4% in 2018
- 2.4% in 2019
Government borrowing and debt
Borrowing:
- £69.5 billion in 2015-16
- £43.1 billion in 2016-17
- £24.3 billion in 2017-18
- £6.4 billion in 2018-19
- £10 billion surplus in 2019-20
Debt forecast:
- 80.3% in 2015-16
- 79.1% in 2016-17
- 77.2% in 2017-18
- 74.7% in 2018-19
- 71.5% in 2019-20
- 68.5% in 2020-21
The deficit is to be cut at the same rate as at the last parliament – securing a budget surplus a year later than planned in 2019-20.
Levels of public spending per head in Northern Ireland remain higher than any other UK country or region. The government and the Northern Ireland Executive remain committed to the objective of rebalancing the Northern Ireland economy.
Tax evasion measures
The government plans to recoup £7.2 billion from tax avoidance and evasion. As a result HM Revenue & Customs will be given £750 million to help combat tax evasion and non-compliance.
To improve tax compliance among small businesses, the government will legislate to give HMRC the power to acquire data from online business intermediaries and electronic payment providers to help identify businesses that are trading but not declaring or paying tax – there will be a consultation on this in July 2015.
The government is going to add tough new penalties to the General Anti-Abuse Rule, and name and shame serial users of failed tax avoidance schemes.
Non-domicile status
From April 2017 permanent non-dom tax status will be abolished meaning anyone in the UK for more than 15 of the past 20 years will pay full taxes on all worldwide income and gains.
Corporation Tax
The Corporation Tax rate which is currently at 20% will be cut to 19% in 2017, then to 18% by 2020.
For large companies with profits over £20 million a year, Corporation Tax payments dates will be brought forward so that tax is paid closer to the point at which profits are earned.
Dividend taxes
From April 2016 the government will remove the Dividend Tax Credit and replace it with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers.
Dividend tax rates will be set at:
- 7.5% for basic rate taxpayers
- 32.5% for higher rate taxpayers
- 38.1% for additional rate taxpayers
Dividends paid within pensions and ISAs will remain tax-free and unaffected by these changes.
Bank levy
The bank levy rate will be gradually reduced over next six years. In order to maintain a fair contribution from the banks a new 8 per cent surcharge to be placed on bank profits from 1 January 2016.
Insurance Premium Tax
Insurance Premium Tax will be raised to 9.5 per cent from November 2015.
Income tax
The personal allowance will rise to £11,000 from April 2016.
The higher-rate threshold will rise in line with the personal allowance, taking it to £43,000 in 2016-17.
National Living Wage
A new compulsory living wage of £7.20 an hour will be introduced from April 2016. The aim is to raise this to £9 hour by 2020.
National Insurance
The government recognises that the new National Living Wage may increase costs for some businesses. In order to help all businesses and charities with additional wage costs, the National Insurance contributions (NICs) Employment Allowance will be increased from £2,000 to £3,000.
The government will consult in the autumn on abolishing Class 2 National Insurance contributions and reforming Class 4 NICs for the self-employed.
Transport and vehicles
New Vehicle Excise Duty (VED) bands will be introduced for new cars from 2017. The duty in the first year will be set according to emissions. Thereafter there will be three duty bands – zero emission, standard and premium. For standard cars – that covers 95 per cent of all cars sold in the UK – the charge will be £140 a year. There will be no change to VED for existing cars – no one will pay more in tax than they do today for the car they already own.
As a result of the VED a new Road Fund will be created to pay for the road infrastructure. The government will engage with the NI Executive on how this money is allocated in Northern Ireland.
Fuel duty will remain frozen this year.
Annual Investment Allowance
Many small and medium sized businesses have benefitted from the enhanced Annual Investment Allowance. This will be set at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.
Inheritance Tax
Currently, Inheritance Tax is charged at 40 per cent on estates over the tax-free allowance of £325,000 per person. Married couples and civil partners can pass any unused allowance on to one another.
From April 2017, each individual will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death. This will be phased in from 2017-18.
The family home allowance will be added to the existing £325,000 Inheritance Tax threshold, meaning the total tax-free allowance for a surviving spouse or civil partner will be up to £1 million in 2020-21.
The allowance will be gradually withdrawn for estates worth more than £2 million.
Student finance
Student maintenance grants will be replaced with new maintenance loans from 2016-17.
Loans will be paid back only when graduates earn above £21,000 a year.
Childcare
From September 2017, working families with 3 and 4 year old children will receive 30 hours of free childcare – an increase from the 15 hours they’re currently offered.
Read full details of the Summer Budget 2015.
