On March 8th, Chancellor Philip Hammond delivered the highly anticipated post Brexit spring budget. Business rate increases, changes to tax payments and new tax avoidance rules are some of the changes that will effect small business owners.
Here’s a summary of the key points you need to know…
- Forecast of 2% growth for 2017, up from 1.4%
- Predicted growth for 2018 is 1.6% followed by 1.7% in 2019, 1.9% in 2020, and 2% in 2021.
- Previous forecasts were 1.4% for 2017, 1.7% in 2018, 2.1% for 2019, 2.1% in 2020 and 2% for 2021.
- £51.7bn in 2016-2017, £58.3bn in 2017-18, £40.8bn in 2018-19, £21.4bn in 2019-20 and then £20.6bn in 2020-21, and £16.8bn in 2021-22.
- In November, borrowing was forecast at £59bn in 2017-18, £46.5bn in 2018-19, £22bn in 2019-20, £21bn in 2020-21 and £17.2bn in 2021-22.
- Any hopes of a surplus by the end of 2020 have already been abandoned.
Self-employed Britons face an increase in their national insurance contributions as the Chancellor attempts to relieve the “unfair burden on people in employment.”
The current 9pc levy on profits will increase to 10pc in 2018 and 11pc in 2019 resulting in an extra £2bn tax revenue for the current parliament.
With more and more Britons opting to be self-employed due to lower rates of tax relative to employment, Hammond stated he would address the multi-billion-pound shortfall by increasing the tax for self-employed.
Limited Company Directors
Small business owners who are running their business as a limited company will also have to pay more tax.
Hammond announced he will reduce the dividend allowance from £5,000 to £2,000 from 2018, meaning a tax increase of £600 a year for the vast majority of small business owners running a limited company, accumulating a further £2.6bn for the government.
This will, however, only affect those with more than £50,000 in stocks and shares outside ISA’s and owners of limited companies will benefit from the previously announced cut in corporation tax from 20% to 19% being introduced in April 2017.
Mr Hammond faced further backlash over businesses facing rates rises as a result of the revaluation of premises, due to come into action from April 1st 2017.
He announced that there would also be a “discretionary fund” for councils to allocate to those businesses hit the hardest, as well as a £50-per-month cap on increases for firms facing the loss of small business relief.
Hammond also stated that said 90% of pubs would be given a £1,000 business rates discount, however, for most pubs it simply isn’t enough.
The changes to business rates amounts to a £435m cut.
New legislation will prevent the circumvention of the Promoters of Tax Avoidance Schemes (POTAS) regime. Advisers who help clients evade tax face fines of up to 100% of the total tax bill they assisted as part of the new rules that came into force from 1 January this year.
The government will also no longer accept the excuse of those that claim they had relied on non-independent advice as taking ‘reasonable care’ when considering penalties for a person or business that uses such arrangement.