Following the budget there are changes to both business and personal taxes, but this year small businesses and the self-employed seem to be feeling the burn – although it’s not all bad news. Money expert Julia Wright fine tunes it for you.
1. CLASS 4 NATIONAL INSURANCE WHAM
It was already known that Class 2 NIC is to be abolished from 6 April 2018 but the main rate of Class 4 National Insurance contributions for the self-employed is to increase from 9% to 10% in April 2018 and 11% in April 2019.It’s a bit of a blow to the self-employed (again). No changes were proposed to National Insurance paid by the employed and employers or to income tax or VAT.
2. A RISE IN PERSONAL TAX-FREE ALLOWANCE THOUGH
The personal tax-free allowance is planned to rise from £11,500 for tax year 2017/18 and to £12,500 by the 2019/20 tax year. Higher rate tax payers will receive a further tax break as the 40 per cent tax threshold is increased once more. From April 2017 only those with an income of more than £45,000 will be subject to a 40 per cent rate of income tax (the threshold was £43,000 before).
3. MINIMUM WAGE
The minimum wage will rise from £7.20 to £7.50 from April 2017, Mr Hammond confirmed. It’s not a massive hike but all adds up over a year.
4. BLOW FOR THOSE DIVIDEND ALLOWANCES
Company directors and private shareholders will have their tax-free allowance on dividends cut from £5,000 to £2,000 from April 2018. This cut in the allowance will mean that a higher rate taxpayer receiving £5,000 in dividend income will have to pay almost £1,000 more in additional tax. That’s quite a whammy.
5. BETTER NEWS ON BUSINESS RATES
Three measures were proposed to help small businesses facing big increases in rates due to the recent business rates revaluations. These measures include restricting any bill increase for a business coming out of small business rate relief to £50 per month and the capping of any future increases. There will be a £1,000 discount for all pubs with a rateable value of less than £100,000. Plus local authorities will be given a £300m fund to deliver discretionary relief for “individual hard cases”
6. DELAY IN MAKING TAX DIGITAL
The good news is that The Chancellor has agreed a 12-month delay in the original timeline for Making Tax Digital (MTD) for unincorporated businesses turning over more than £10,000. Unincorporated businesses that have an annual turnover below the VAT registration threshold of £83,000 will have until April 2019 to prepare before MTD becomes mandatory, giving them more time to prepare for digital record keeping and quarterly updates .At least that’s a bit less admin to worry about now!
Confused? Talk to the expert…
Julia Wright is an expert accountant with the answers. We know, we’ve been asking her for about a decade.