Last week I gave you 3 of the main things you need to know about George Osborne’s 2016 budget (sorry that post was getting rather lengthy…!). So without further adieu, let’s dive right into the final 3…
4. Class 2 National Insurance abolished.
If you are self-employed, you will pay Class 2 National Insurance, currently at £2.80 per week. From 6 April 2016 this will not be paid separately, but merged with the annual tax payments. However, from the 2016 budget it was announced that it will be scrapped altogether from 5 April 2018. So good news for the self-employed (this does not affect limited companies)!
5. Overdrawn director’s loan accounts will be charged 32.5% tax.
If you run a limited company and take out money that is not a dividend or a salary, the payment will be classed as a director’s loan account. If the loan is still outstanding at 9 months after the company year-end, then you will be charged 32.5% tax (it was previously 25% tax). Technically it isn’t a tax since if you pay it back you will recoup the tax back, but ideally you would plan not to pay it at all.
Now lastly but potentially the biggest announcement of all…
6. The Lifetime ISA.
If you are 39 (or younger) as at 5 April 2017, you will qualify for a lifetime ISA. Essentially this is a savings account where you can put in £4,000 every year and the government will put in another £1,000. Also, any interest that is earned in the account is tax-free! You can’t take the money out until you are pensionable age UNLESS you are about to buy a first-time property. So it sort of acts as a hybrid of a pension and a help-to-buy ISA.
For those of you generating surplus cash I think this is a great idea and brilliant for anybody under 39. I would encourage everybody to apply for them when they become available.
If you have any questions on anything in the budget feel free to give us a call on 0132 430 9018.