March 2017 Budget Small Businesses

Concerned about what impact the changes to Budget 2017 will have on your business?

 

Quarterly Tax Returns back-down

The first point of note within the new Budget is that the government have partly backed down from their proposal to force small businesses and the self employed to file four tax returns per year on a quarterly basis in the face of overwhelming opposition from the accounting profession.

 

The new changes will mean only businesses below the VAT registration threshold of £83,000 will be required to file these quarterly returns.  The wording implies that businesses registered for VAT but who still trade below the £83,000 mandatory registration threshold will not be subject to the quarterly filing obligation but confirmation on this point will hopefully follow soon.

 

While of less interest to the majority of our clients who are not English based, it’s worth noting that caps on rate increases for small businesses have been brought in.  It remains to be seen whether the devolved governments will implement any version of this cap.

 

Increase in Class 4 Employer’s NIC

A more relevant change is the increase in the national insurance rate paid by the self employed.

 

From April 2017 this will rise from 9% to 10%

From April 2019 this will rise from 10% to 11%

 

This change represents a slight jump in the costs of being self employed, but coming on top of recent changes such as HMRC’s IR35 legislation and the crackdown attempt to force self employed traders to be treated as employees, it continues a larger trend of making self employment less advantageous.  Those individuals operating through a limited company will be unaffected by this.

 

Tax-Free Dividend Allowances changes

Under the new Dividend rules coming in from 6 April 2017, individuals were originally to be entitled to a £5,000 tax free allowance on Dividends which would operate in a manner similar to the personal allowances (With some negatives attached) as a way of offsetting the governments 7.5% tax hike on all dividend income.  Unfortunately it appears this attack on those receiving compensation by means of Dividends is set to continue as the allowance will remain at £5,000 for one year only before being slashed to £2,000 from April 2018.

As above this change is likely to hit small businesses operating through a limited company hardest of all as each of them will see a fairly significant spike in tax from the changes.

 

Tax Allowance Increase

The personal allowance will be raised again from £11,000 to £11,500, providing savings of an extra £100/year in tax.

 

NS&I Three Year 2.2% Bond

The government have confirmed that a new bond will be available from Spring 2017 allowing people to purchase 3 year bonds at a 2.2% interest rate.  While the interest rate on this government backed bond compares favourably to the best market rates out there, the £3,000 cap on the amount of the bond means that the amounts involved will still be fairly minimal.  Estimate at the moment suggest it should produce about £200 of interest over the three years.

 

 

Overall a budget with not much good news for small businesses.

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