In yesterday’s Spring Budget 2017 the government announced that its aims are to:
- help young people from ordinary working families across the country get the skills they need to do the high-paid, high-skilled jobs of the future, vital for a competitive workforce,
- give more children the chance to go to a good or outstanding school that sets them up to succeed,
- support the social care system with substantial additional funding, so people get the care they deserve as they grow older, and support both local NHS plans and improvements to Accident and Emergency with new capital investment,
- invest in cutting-edge technology and innovation, so Britain continues to be at the forefront of the global technology revolution,
- continue to bring down the deficit so the UK gets back to living within its means.
I think most of us will read that with cynicism, and we want to cut through the chancellor’s jibes and digs at the opposition and find out how we’ll be affected. There was little in the way of surprises, or measures to help small businesses. I’m not going to address every aspect of the budget, but here is a brief round up of the main headlines relevant to small businesses:
From April 2017 the personal tax allowance will be £11,500. The higher rate threshold increases to £45,000.
For self-employed people: from April 2018 class 4 NIC increases from 9% to 10% on taxable profits above the lower profits limit. The lower profits limit in 2017/18 will be £8,164. Class 2 NIC will be abolished from April 2018.
Self-employed people earning a taxable profit of over £16,250 will pay more NIC from April 2018.
Making Tax Digital
From April 2018 small businesses must to report financial data to HM Revenue and Customs quarterly. This won’t be implemented until April 2019 for those with a turnover below the VAT threshold. Businesses with a turnover of £10,000 or less will not need to change to quarterly reporting.
The registration limit will increase to £85,000 from April 2017, and the de-registration limit will be £83,000
Increases will be capped at £50 for businesses coming out of Small Business Rate Relief. There will be a £300 million discretionary fund for local authorities to help businesses affected by rates revaluation.
National Minimum and Living Wage
Increases will apply from April 2017
Something to be aware of – a new green paper will be published on protecting consumer rights. Changes will include new protections against unfair clauses, unexpected fees when subscriptions renew or free periods end, and steps to simplify terms and conditions.
Spring Budget 2017: Limited Companies
The dividend allowance will be reduced from £5,000 to £2,000 per year from April 2018. Costing from £225 for owner/directors of small limited companies.
A little good news for limited companies will be the fall in corporation tax rate to 19% from April 2017, and to 17% in April 2020.
R&D Tax credits
The government will make administrative changes to the Research and Development Expenditure Credit, to increase the certainty and simplicity around claims. They have also promised to take action to improve awareness of R&D tax credits among SMEs.
The Spring Budget 2017 was the last time a budget will be held in spring. From 2018 there will be a Spring Statement and the budget will be held in autumn.
In the short-term it could be beneficial for some self-employed people to incorporate their business. Traders would gain a little control over their remuneration, splitting between salary and dividend payments. However, the trend over the last couple of years has been for the government to try to reduce the difference in taxation between different business vehicles. It could be just a matter of time before we see an increase in tax on dividends, or the introduction of an NI charge on dividend income.
The government budget documents provide further information.
If you’re concerned about how any of the changes in the Spring Budget 2017, please get in touch.