Budget 2017: The Chancellor of the Exchequer, Philip Hammond, announces plans that have the potential to hit small businesses.
Our partners at chartered accountants and business advisers, Dean Statham, have given their rundown on what the biggest changes are and how they have affected small businesses:
NIC increases for the self-employed
To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.
The increases are:
- From April 2018, an increase from 9% to 10%, and
- From April 2019, a further increase from 10% to 11%.
The earlier increase is timed to coincide with the cessation of Class 2 contributions.
Business rates increases
In response to the negative publicity regarding increases in business rates in England, particularly for retailers, the Chancellor has stepped in with help for smaller businesses.
There are three areas of relief announced:
- Small businesses that find they are losing Small Business Rates Relief from April 2017, will have any annual rates increase capped at the higher of £600 or the transitional relief cap.
- Local authorities will be funded to provide an element of discretionary relief, and
- Public houses with a rateable value of up to £100,000 will benefit from a fixed £1,000 business rate discount – subject to State Aid limits if multiple properties are owned. This discount is available for one year from April 2017.
Local authorities will be fully compensated for any loss of income because of these measures.
Making Tax Digital
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.
Dividend allowance to be reduced
From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.
Changes to trading and property income allowances
The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.
VAT registration and de-registration limits
From 1 April 2017:
- Registration threshold increases to £85,000
- Deregistration threshold increases to £83,000
If you are unsure if your business has been affected by any of the changes, or it has been and you need some support or guidance, then call Dean Statham on 01782 614 618.