Please note this content was written contemporaneously, and may well now be superseded
Budget 2017 – First Impressions
Making Tax Digital – no move on the £10,000 threshold – if you earn over that you will have to start filing quarterly accounts on line – but there is a deferment of one year for non VAT registered sole traders. Implementation dates are now:
– April 2018 Sole traders & landlords with income above the VAT threshold for Income Tax
– April 2019 Sole traders & landlords with income below the VAT threshold for Income Tax
– April 2019 VAT registered businesses for VAT
– April 2020 Companies for Corporation Tax
The timescale and requirements are still onerous and short. See our guide to Making Tax Digital
Class 4 National Insurance rising from the current 9% to 10% in 2018 and 11% in 2019. However the weekly class 2 NI is being abolished from April 2018 (we knew that anyway). Sole Traders pay Class 4 NI on profits over £8,164 (17/18)
For PCS and Company Owners, the planned cuts in Corporation Tax are confirmed, with the rate dropping to 17% in 2020. Meanwhile from first April onward, as an interim measure, the rate becomes 19% from the current 20%.
However countering this, from April 2019 the Dividend Allowance reduces from £5,000 to £2,000 – this is the amount of Dividends taxed at 0%. Typical cost £225 a year in extra tax. The Corporation Tax cuts partly mitigate this.
Finally, it was confirmed the April 2017 Public Sector IR35 changes are going ahead, with a couple of bits of detailed fine tuning which won’t really be significant. Have a look at our guide here
Business Rates have been in the media recently, and for owners of commercial premises the news is
– maximum increase of £600 in annual rates for any business loosing Small Business Relief
– £300m discretionary funds for local Councils to use to support hard cases in their areas
– more frequent revaluations to make the process smoother
– no substantive commitment to outright reform
Its worth noting that from April 2017 onward there had already been announced a significant increase in Small Business Relief, from £6,000 Rateable Value to £12,000 Rateable Value for outright exemption from business rates, and a taper for Rateable Values up to £15,000 – so the £600 maximum increase today refers to businesses whose Rateable Value was less than £12,000 and has risen to over that in the April 2017 revaluation.
Vat Threshold rises to £85,000 from £83,000 – we’ve seen a number of businesses exceeding this of late, please be aware it is calculated on a rolling 12 months basis – not financial year or tax year. If you are anywhere near this, watch it like a hawk and take advice early.
Although not a budget announcement, watch for the changes to Flat Rate VAT for “Low Cost Traders” coming in this April – our guide is here