What did it do to your business?
These are the main points affecting businesses.
Small Businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD)
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory.
Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
Effectively this has delayed the initial implementation of MTD by a year. This can only be good news for our smaller clients who were worried about having to file four tax returns a year. It is not yet clear if the whole implementation will move back by a year or if they will try to go with ALL non-limited companies during the 2019 tax year. Watch this space!
£435 million to support businesses affected by the business rates relief revaluation
This means no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016-17.
Funding for local authorities will allow them to provide £300 million of discretionary relief to provide help to businesses most affected by the revaluation.
And from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.
Some good news for many as the increase was forecast at over 400% on some properties. Bad news is probably on its way in the coming years if you operate a digital business from home. The government are going to be consulting on being able to charge business rates on whatever premises you operate from. You will be able to check here after the 1st of April to see what your new rateable value will be.
The main rate of National insurance contributions (NICs) for the self-employed will increase
Currently, the self-employed may have to pay both Class 4 and Class 2 NICs:
- Class 4NICs at 9% are paid on profits between £8,060 and £43,000
- Class 2NICs are paid on profits of £5,965 or more
From 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.
Taken together, only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.
This better reflects the fact that the differences in contributory benefit entitlement between the self-employed and employees are now small, following the introduction of the new State Pension in April 2016.
In the summer, the government will also consider whether there is a case for greater consistency in parental benefits between the employed and self-employed.
The initial thought amongst accountants was that the government would put up NIC’s in line with the employed rate at 12% with immediate effect. Obviously by spreading the rise over 2 years and remaining below the level of an employed person there is still a small benefit. The average rise is forecast to be 60p per week.
The government today announced that they would consult on the proposed changes to the NI contributions for the self-employed and would make this change part of larger changes for self-employed people which will be announced in the autumn. Does this mean it has now gone away? We don’t really think so!
very much doubt it.
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018
This will reduce the tax difference between the self-employed and those working through a company. Typically, general investors will need over £50,000 worth of stocks and shares outside an ISA to be affected.
This could be an additional cost of £225 if you are taking the full £5000 dividend and paying basic rate tax.
Does anything in the budget worry you? Call us to discuss 01925 555152
You can read the full budget release here