Update – Since announcing plans to increase National Insurance rates for the self-employed in the Budget 2017, Chancellor Philip Hammond has said the government will not proceed with the increases.
There’s been a lot of headlines condemning the Budget 2017 announcement, which breaks a 2015 manifesto pledge on tax rises. We’ve covered the headlines that will impact you the most.
The budget 2017 announced a number of reliefs to balance the new business rates valuations.
For a business that is coming out of small business rates for the first time, the increase will be capped at £50 per month in the first year. In subsequent years it will be the higher of £50 or the transitional relief.
For pubs with a rateable value below £100,000, there will be a £1,000 discount in 2017/18.
There’s a £300 million discretionary fund provided to local authorities for them to allocate to local businesses.
We would recommend speaking to your local authority business rates department to see if you qualify for any of the above reliefs.
The tax-free allowance will be reduced to £2,000 from April 2018.
If everything else were to stay the same a taxpayer with total income within the basic rate band would pay an additional tax of £225. A higher rate taxpayer would pay an additional tax of £975.
If you are a shareholder in a limited company, it’s really important you take the right proportion of salary vs dividends. You should also be making the most of your spouse’s or civil partner’s allowances too (and perhaps even those of your children, depending on how old they are).
Please get in touch with our tax team if you’d like to discuss these changes.
National Insurance – Updated
Originally, Class 4 National Insurance was set to increase to 10% from April 2018 and to 11% from April 2019. This has now been dropped.
Class 2 National Insurance will still be abolished. Therefore from April 2018, Self Employed will overall pay less National Insurance.
A report commissioned to look into the tax impact of employment vs self-employment will be issued in the summer.
A report has been commissioned to look at easing the administrative burden.
Making Tax digital
For self employed people below the VAT threshold of £83,000 this will be deferred for one year, until April 2019.
There will be increased availability of free school travel to those on free school meals if they have a place at a selective school.
It’s been confirmed there will be thirty hours of free childcare for children over three if household income is below £200,000.
To recap the changes we already knew about:
Personal allowance to increase to £11,500 from April 2017.
Basic tax rate band – £33,500.
Scottish taxpayers will have a basic rate band of £31,500.
Corporation Tax rate reduced to 19% from 1 April 2017.
Lifetime ISA available for 18-40 year olds.
ISA limit increased to £20,000 per year.
Tax relief change on relief for mortgage interest payments on buy-to-let properties.
The living wage will increase to £7.50 for over 25s.
Residence Nil Rate band available for estates that contain a residence that is being passed to a direct descendant.
Salary sacrifice no longer available except for low emission cars, accommodation, childcare vouchers, cycle to work schemes and pensions. Existing schemes can continue to April 2018.