HOW THE SPRING BUDGET 2017 AFFECTS THE SELF EMPLOYED & LIMITED BUSINESSES
The income tax personal allowance and the basic rate bands for this year’s tax return have already been announced. From 6th April 2017, personal allowance is set to increase by £500 to £11,500 and the basic rate band will rise to £33,500 from £32,000. This will result in a higher rate threshold of £45,000.
The Chancellor has proclaimed that the personal allowance will continue to rise to £12,500 and higher rate threshold to rise to £50,000 by the end of the Parliament. Also, the Capital Gains Tax annual exemption will increase by £200 in 2017/2018 from £11,100 to £11,300.
The rate of National Insurance Contributions for self-employed people will rise. Presently, self-employed individuals have to pay both Class 4 and Class 2 National Insurance Contributions (NICs):
From April 2018, it has been announced Class 2 NICs will be abolished and Class 4 NICs will remain the same. As a result of this, the self-employed will save £145 annually. This will allow them to keep more of their money and be able to invest it back into their business.
Tax Free Dividend Allowance will be reduced from £5,000 to £2,000 from next year April 2018. This is because this will lessen the tax difference between the self-employed and employees. Those that will be affected, will be investors with stocks and shares worth over £50,000 outside an ISA.
£435 million will be given to support any business that have been affected by the business rates relief revaluation. Therefore, no small businesses will pay more than £600 coming out of the small business rates relief than they did in year 2016-17.
Financing local authorities will permit them to administer £300 million of discretionary relief to contribute in helping the businesses that are heavily affected by the revaluation.
Landlords and small businesses below the VAT threshold will be given an extra year to get ready for Making Tax Digital. Businesses that are owned privately (unincorporated businesses) that have a turnover under the VAT threshold will have until April 2019 to prepare for this before "Making Tax Digital" becomes mandatory.
Making Tax Digital is where businesses will have to use a specific digital software to maintain their tax records and update HMRC quarterly (every 3 months).
The introduction of this complex digital scheme, which is involving commercial supplies or accounting software, runs smoothly, there is a likelihood that there will be substantial administrative trouble, especially for those businesses that presently do not use an accounting software.
By Gopal Nath at Tax Affinity Accountants
Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting business throughout the UK, they regularly help clients grow their business providing tailored advice.
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