What does the spring Budget means for UK business?
As Philip Hammond delivered the 2017 spring Budget there was a sigh of relief from many UK businesses.
He reiterated his desire for a fairer tax system and repeated his commitment to reduce corporation tax to 17% by 2020 initially falling to 19% by April this year.
We look at some of the main implications on UK businesses of the spring budget:
Hammond announced a proposed total of £435 million in business relate relief to assist those facing the largest increases because of changes to national business rates. £110 million of this has been earmarked for small businesses which are set to lose their small business rate relief.
Any business coming out of small business rate relief will also benefit from an additional cap of £50 per month.
Hammond said: ‘No business losing small business rate relief will see their bill increase next year by more than £50 a month.’
He also announced plans to provide local authorities with a £300m fund to provide discretionary relief to businesses most affected by business rates revaluation.
Changes to the National Insurance system were not welcomed by those self-employed. From April 2018 class 2 National Insurance contributions (NICs) will be abolished and class 4 NICs for the self-employed will rise from 9% to 10%, with a further 1% increase expected in 2019.
Class 4 NICs are paid on profits of between £8,060 and £43,000 and the proposed increases will raise £1.4m a year by 2022.
Hammond confirmed that personal allowances (the amount earned before income tax) will rise to £11,500 from April, with plans to increase it further to £12,500 by the end of this Parliament.
The higher rate threshold, will also increase to £45,000, before rising to £50,000 by 2020.
Directors and shareholder’s tax-free dividend allowance will reduce from £5,000 to £2,000 from April 2018.
HMRC said ‘This will reduce the tax difference between the self-employed and those working through a company. Typically, general investors will need over £50,000 worth of stocks and shares outside an ISA to be affected.’
Hammond plans to generate an extra £820 million by tackling tax avoidance. He’ll be targeting anyone who ‘designs, markets or facilitates’ the use of tax avoidance arrangements.
HMRC said ‘Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before Making Tax Digital (MTD) becomes mandatory.
Under MTD businesses will use digital software to keep tax records and update HMRC quarterly.’