It’s that time of year already, the new tax year is soon to be upon us and the government has rolled out a new Spring Budget. There have been many announcements that are likely to affect businesses in the UK and more changes to come in the new tax year.
Here are some key points of Hammond’s budget:
Business rate cuts
Businesses rates are the cause of concern for many businesses who are facing sharp increases in the amount they will have to pay due to rising value of their property. This has left many businesses, particularly in London with worries that they will simply not be able to afford the rising cost.
Hammond has addressed this concern by announcing further cuts to business rates. He was adamant that they cannot be scrapped because they bring £25bn into the economy a year.
He has put forward three proposals:
- Businesses coming out of business rate relief will have an extra cap which will mean that their rates will not increase by more than £50 a month.
- A £300m fund will be available for councils in order to provide discretional relief.
- All pubs with a rateable value of less than £100,000 (90% of all pubs) will see a £1,000 discount on business rates.
These changes will mean a further £435m cut in business rates.
There has been a bit of uncertainty with National Insurance Contributions for the self-employed and how getting rid of Class 2 will affect the entitlement to state benefits.
There is an ongoing review into employment practices being carried out by Matthew Taylor. He says that the self-employed have always had different tax rates because of differences in pensions. However, the new state pension has meant that there’s no longer any need for this. He also says that the lower NIC rates cost the taxpayer £5bn a year.
There has been consideration of reversing George Osbourne’s decision to get rid of the Class 2 NIC rate. Instead Class 4 NICs will be set to increase from 9% to 10% in April and to 11% in April 2019 for the main rate. For businesses with profits above £43,000, the rate will increase from 2% to 10% and 11% in April 2019 as well.
Hammond has said that the Treasury will raise an extra £145m by 2021-22 through increased taxes of the self-employed.
To try and discourage people from forming companies to reduce tax bills, Hammond has announced changes to dividend allowances.
The gap in tax and NIC between those with a company and an employee is greater than between that of the employed and self-employed. Hammond has called this unfair and must be challenged. He has said that the dividend allowance has encouraged the proliferation of incorporation.
In response to this he has announced that the tax-free dividend allowance for shareholders and directors of small private companies is to be lowered from £5,000 to £2,000 from April 2018.
What do you think of the new Spring Budget announcements? Will you be affected by rising business rates, dividend changes or NI? Let us know your thoughts in the comments section.