There were winners and losers in the Budget, according to Mark Hunt, private client tax partner at the Cheltenham office of national audit, tax and advisory firm Crowe Clark Whitehill.
But he stressed the limited company would remain the best structure for those wishing to develop their businesses.
Mr Hunt said: “The Chancellor is looking to support investment and growth. However, property investors and shareholders may face some pain.
“The corporation tax rates of 19 per cent in 2017 and 18 per cent in 2020 will reduce tax bills for over a million businesses which is good news.
“Further measures promoting the UK for business were a permanent annual investment allowance of £200,000 from January 2016, giving 100 per cent tax relief for qualifying purchases, and 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investors mortgage interest relief for buy-to-let properties would be restricted and the wear and tear allowance withdrawn.
Mr Hunt went on: “Changes to taxation of dividends will see the effective rate of tax on dividends increase by 7.5 per cent. 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“In a surprise announcement, tax relief for the purchase of goodwill has been completely withdrawn, increasing the effective costs of acquisition.”
