Budget 2016: The Budget for entrepreneurs

Budget 2016: The Budget for entrepreneurs

Dermot Callinan, Head of Private Client, comments on today's Budget announcement and its impact for entrepreneurs.

Also on KPMG.com

Commenting on the Budget today Dermot Callinan, Head of Private Client, commented:

“Whilst some measures seem to increase corporation tax for larger companies through loss relief and interest deduction restrictions, entrepreneurs and private capital have benefited. This seems to be a deliberate tilt of the pitch toward home grown enterprise through a number of measures.”

“The corporation tax rate in the UK was already becoming even more competitive at 18% from 2020, but this move to reduce that to 17% makes it even more attractive to reinvest capital in a company for the longer term. The previously announced tax increases on dividends had already made the extraction of profits from a company unattractive with a top tax rate of 38.1%. This at the time seemed expensive compared to capital gains tax at 28% or even 10% for working entrepreneurs. However, the gap has been opened further as a result of the proposed reduction in CGT to 20% and the proposed introduction of a new Investor Relief to mimic and run alongside Entrepreneurs Relief.

“Therefore, there is little incentive to extract profits enjoying a low corporate tax rate in the company and much better to wait until a capital gain.”

Ends

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