In what is set to be the last Spring Budget, there was very little for small businesses to consider. Though the few areas where there were changes, those changes will have quite an impact.
Following the change in taxation of dividends in April 2016, the tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
For basic rate tax payers this will mean an increase in tax of £225 per annum. For higher rate tax payers, it will be £975.
For Director/Shareholders it’s a further blow following those changes made last April.
To soften the blow, the government have committed to plans to reduce Corporation Tax to 17% (currently 20%). That starts with a reduction to 19% from 1 April 2017.
Class 4 National Insurance (Self-Employed)
UPDATED – as was made very public, the government have u-turned from the increase in Class 4 NI for the self-employed.
For the self-employed, there was bad news regarding National Insurance as the government stated rates would increase from 9% to 11% by 2019/20, to match NI for employees. In 2019/20 when the full rate of 11% is in place, a self-employed individual with income of £30,000 will see a tax increase of £430.
In better news it was confirmed that Class 2 NI will be abolished from April 2018, providing a saving of around £150.
Making Tax Digital
Some relief for unincorporated businesses was announced, with a deferral of the staging date for MTD to April 2019, however, only for businesses with turnover below VAT threshold. Keep up to date on our dedicated Making Tax Digital page.
It was announced that there will be support for Small Businesses losing their Small Business Rate Relief. This will be the greater of £600 or the real terms transitional relief cap for small businesses each year.
Other points to note:
- Personal Allowance to reach £12,500 by 2020
- VAT Registration Threshold now £85,000
The government have confirmed that they are looking to level the playing field for taxation regardless of how an individual earns that income.
There is good and bad in the budget for small businesses but the ‘good’ had generally been announced in previous budgets and the government have nearly confirmed their commitment to those policies.
The Chancellor spoke of the importance of small business to the UK economy but policies introduced over the last two years have not always seemed to support that with most Director/Shareholders now facing greater tax bills.