Key points effecting Small Businesses in the Spring Budget 2017 and the revised introduction of making tax digital
Due to the snap election, some of the measures mentioned in the Budget have been put on hold. These include the annual tax free dividend allowance being reduced from £5,000 to £2,000 in 2018/19. The Money Purchase annual allowance being cut from £10,000 to £4,000 from April 2017. And finally, the reform of non-doms has been removed from the Finance Bill.
There is also little mention in the Bill of the digital tax changes for small businesses, which may be delayed further. However, it is likely that these measures will be introduced if the Conservatives are successful, so our blog still contains the changes announced in the Spring Budget.
Changes announced in the Spring Budget
Personal allowance rises to £11.5k
The personal allowance will rise by £500 to £11,500 and the higher rate threshold will increase by £2,000 to £45,000. (Lower if you are in Scotland!)
Vehicle Excise Duties (VED) rates
Have increased in line with the RPI.
Approximately 98% of individuals owning a car first registered after March 2001 but before 1 April 2017 will not have to pay no more than £5 extra VED and owners of vans and pre-2001 cars will pay £5 extra.
But note the rate of VED has significantly increased on new vehicles registered after the 31 March 2017 – Introduced in the previous year’s budget.
VAT registration threshold
From 1 April 2017 the VAT registration threshold will increase to £85,000 from £83,000 and the deregistration threshold will rise from £81,000 to £83,000.
The Chancellor has announced a cut in the dividend allowance from the current £5,000 to £2,000 from April 2018. Note: £5,000 was only introduced in the tax year 2016/17!
The move will hit shareholder directors in business who frequently use dividends as part of their pay packages.
The rates of tax paid on dividends is linked to the personal allowance, starting at 7.5% for basic rate, 32.5% for higher rate, and 38.1% for additional rate taxpayers.
Corporation tax rate
From the tax year 2017/18, the corporation tax rate will be cut to 19%, which reflects a massive fall from the high of 28% before the 2008 crash. The new rate will come into force from 1 April.
The rate will be cut to 17% in 2020.
Note: The new rates of income and corporation tax are only applied once the legislation is passed.
Making Tax Digital
The Chancellor Philip Hammond has delayed the introduction of Making Tax Digital for sole traders, landlords and the self employed operating under the new £85,000 VAT threshold
The Chancellor’s announcement means that sole traders, the self employed and buy-to-let landlords with income of less than the current £83,000 VAT threshold will not have to start quarterly reporting until 2019, a one-year deferral from the planned April 2018 introduction date originally set out in the recent consultation feedback documents issued by HMRC at the end of January.
There is still no confirmation of whether the £10,000 threshold for Making Tax Digital will be raised although this will be confirmed on 20 March when the draft Finance Bill legislation is issued.
Businesses over the £85,000 VAT threshold will have to report under quarterly reporting from April 2018.
If you have any question on the changes in the Spring Budget, then please contact either Martin or Jane at the Helpful Bean Counter http://firstname.lastname@example.org