Philip Hammond announced the Spring budget as his first and last. This is due to the move to autumn for the main budget with a spring update instead.
This update highlights some of the key impacts for small businesses:
The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019. It has been estimated that this delay will cost the Treasury some £280m between 2018 and 2022.
From April 2018, Class 4 National Insurance Contributions will increase from 9% to 10% with a further increase from April 2019 to 11%. The first increase coincides with the previously announced cessation of Class 2 contributions. The increased rate remains lower than the corresponding rate for employees who pay National Insurance at 12% on the same income levels. Both the employed and self-employed pay 2% National Insurance Contributions on income above the higher rate threshold.
From April 2017, the rules for individuals providing services to the public sector via an intermediary such as a personal service company (PSC) will change. The new rules will shift the responsibility, for deciding whether the intermediaries’ legislation known as IR35 applies, from the intermediary itself to the public sector receiving the service. It has been confirmed as part of the Budget measures that the necessary legislation for this change will be introduced as part of Finance Bill 2017.
The new dividend tax allowance was introduced in April 2016. The new allowance replaced the dividend tax credit with an annual £5,000 dividend allowance with tax payable on dividends received in excess of this amount. Mr Hammond announced is a significant cut in the tax free allowance to £2,000 from April 2018.
The taxable turnover threshold, that determines whether businesses should be registered for VAT, will increase from £83,000 to £85,000 from 1 April 2017.
Any enterprise coming out of small business rate relief will benefit from an extra cap. This means their rates will not increase by more than £50 a month. 90% of local pubs will have a £1,000 discount on their business rates bill and there will be a £300m fund for local councils to offer discretionary relief.
Capital gains – The annual exemption rises to £11,300 on 6 April 2017. This is a surprise as this
As previously announced, the personal allowance limit will increase to £11,500 from April and £12,500 by 2020. The government said that the increases to the personal allowance and higher rate, which continues a seven consecutive-year growth, will save 31 million taxpayers income tax.
Future changes
The government are looking at partnership tax, and will release a consultation paper later this year.
Rent a room relief is also being looked at, and may well be reformed from April 2018.
We should also expect to see further consultations regarding employee benefits and expenses, and in particular employer-provided accommodation.