Budget 2016 – headline points

Stephen Smith, Legal Director, CMS

George Osborne’s 2016 Budget contains a surprisingly broad range of new tax measures addressing everything from sporting testimonials to oil fields.  However, the main changes are as follows.


Corporation tax will come down to 17% from April 2020.

From April 2017, companies will only be able to use carried forward losses against 50% of their profits above £5m.  However, the loss rules will also be made more flexible.  Losses incurred in one company may be offset against profits arising in another group company.  The rules whereby losses arising from one type of activity (e.g. trading) may be carried forward and set off against profits arising from the same activity will be relaxed.

Also from April 2017, interest deductions for corporates will generally be capped at 30% of EBITDA but may alternatively be limited by a group-wide ratio.

From around July 2016, UK withholding tax will apply to royalty payments for the use of intangible assets such as trademarks and brand names, unless excluded by double tax treaties or EU Directives. We will follow with more detailed comments in a separate blog.

 Real Estate

Confirmation that the 3% additional SDLT rates will apply to the purchase of additional residential properties from 1 April 2016.

A reform of stamp duty land tax on commercial property will be made from today onwards so that SDLT applies on a “slice” basis with a top rate of 5% on consideration above £250,000, an increase in the effective rate payable on larger transactions.


The higher and basic CGT rates of CGT will be reduced (28% to 20% and 18% to 10%) although these reductions will not apply to gains on UK residential properties or carried interest.

Class 2 NICs for self employed individuals will be abolished from April 2018.

Entrepreneurs’ relief will be extended to external investors (those who are not employees or directors) who make long term investments in unlisted trading companies.

A new lifetime ISA account will be launched.  It  is designed to promote saving towards the purchase of a first home and to fund pension benefits.

A lifetime cap of £100,000 has been introduced on the amount of tax benefit that an employee can enjoy on shares acquired though employee shareholder status (ESS).

Proposed reforms to the taxation of non-doms will go ahead in April 2017. Favourable transition provisions have been announced.

Other measures

There is the usual raft of anti-avoidance measures, this time addressing:

The Chancellor also announced changes in relation to gambling and carried interest.

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