Spring budget 2017
We have put together the key points for businesses from the Chancellor’s Spring budget:
- Implementation of Making Tax Digital – the implementation of Making Tax Digital will be delayed for one year, for sole traders, landlords and the self-employed operating under the new £85,000 VAT threshold. The changes will ease the financial burden on small businesses to invest in accounting software and training for Making Tax Digital rollout beginning April 2018.
- Class 4 National Insurance contributions – to increase from the current rate of 9% to 10% in April 2018 and 11& in April 2019.
- Tax-free personal allowance – from 6th April 2017 the tax-free personal allowance will increase to £11,500. The higher rate threshold will rise to £45,000 except in Scotland where it remains at £43,000.
- Corporation tax – it was confirmed that the rate of corporation tax will reduce to 19% from April 2017. As previously announced, the corporation tax rate will reduce by a further 2% to 17% by 2020.
- Tax-free dividend allowance – a reduction in the tax-free dividend allowance for shareholders from £5,000 to £2,000 from April 2018.
- Capital gains tax – the annual capital gains tax exemption increases by £200 to £11,300.
- VAT – the taxable turnover threshold, which requires a person to register for VAT, increases from £83,000 to £85,000 per annum. The threshold below which a VAT-registered person may apply to deregister increases from £81,000 to £83,000 per annum, and the relevant registration and deregistration threshold for Intra-Community acquisitions will also be increased from £83,000 to £85,000 per annum. All these changes will take effect from 1st April 2017 and will prevent around 4,000 businesses from having to register in the financial year 2017 to 2018.
- Flat rate VAT scheme – with effect from 1 April 2017, businesses eligible to use the flat rate VAT scheme but which are classified as ‘limited cost’ businesses, will have to account for VAT at 16.5% of their relevant gross turnover.
- Business rates – the adverse effect of the changes to the rates revaluation in England in April 2017 on some businesses may be reduced in certain circumstances. The measures include:
- support for small businesses losing small business rate relief to limit increases in their bills to the greater of £600 or the real term transitional relief cap for small businesses each year
- providing English local authorities with funding to support discretionary relief, to allow them to provide support to individual hardship cases in their local areas
- a £1,000 business rate discount for pubs with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2017.
- Vehicle excise duty – rates for hauliers and HGV Road User Levy frozen for another year.
- Cash basis entry – from 6th April 2017, the cash basis entry threshold is to increase from £83,000 to £150,000. Cash basis accounting is an optional and simplified method for calculating and reporting taxable profits for qualifying trading businesses.
- Tax avoidance clampdowns:
- On businesses converting capital losses to trading losses
- On the abuse of foreign pension schemes
- Introducing VAT on roaming telecoms services outside the EU.
If you would like to discuss how any of these changes will affect you and your business please get in touch.