The Chancellor delivered his Budget on 8 March 2017, with some surprises for those running their own businesses.
DIVIDEND TAX CHANGES
Dividend Tax was introduced in April 2016, and allows everyone £5,000 dividends tax free. Any further dividends up to the higher rate threshold are taxed at 7.5%, with dividends above the higher rate taxed at 32.5%.
WHAT ARE THE CHANGES?
The Chancellor announced that the tax free dividend allowance will be reducing to £2,000 from April 2018.
WHAT DOES THIS MEAN?
An extra £225 in basic rate tax payable per year, or £975 if you’re a higher rate tax payer.
*top tip – get in touch with us now for ideas on making the most of the £5,000 tax free dividend allowance.
NIC FOR THE SELF-EMPLOYED
WHAT ARE THE CHANGES?
**15 March 2017 update – it’s been announced today that the NIC rise will no longer happen in 2018**
Class 2 NIC will be abolished in April 2018. Class 4 NIC will increase from 9% to 10% in April 2018, and 11% in April 2019.
WHAT DOES THIS MEAN?
This depends on your self-employment profits, but means an extra penny in the pound out of your pocket for the tax man.
*top tip – get in touch with us to see whether it’s worth you incorporating your business as a limited company.
CORPORATION TAX CHANGES
WHAT ARE THE CHANGES?
Corporation tax will reduce from 20% to 19% in April 2018.
WHAT DOES THIS MEAN?
Companies will pay 1 penny less in the pound.
VAT FLAT RATE SCHEME CHANGES
WHAT ARE THE CHANGES?
VAT registered businesses using the flat rate scheme may need to use the higher rate of 16.5% flat rate if their business has very low expenditure.
WHAT DOES THIS MEAN?
If you’re using the flat rate scheme you may need to use the new rate, or deregister from the flat rate scheme and move back to the standard VAT scheme.
*top tip – get in touch with us to see if the changes affect you.
MAKING TAX DIGITAL
WHAT ARE THE CHANGES?
Rollout begins April 2018. However for unincorporated businesses with turnover below the VAT registration threshold there would be a delay of one year to the introduction of quarterly reporting.
WHAT DOES THIS MEAN?
For businesses with turnover (sales) over the VAT threshold (£85,000 from April 2017) you will be required to submit 5 online returns each year from April 2018.
For businesses with turnover below the VAT threshold, you will have to submit 5 online returns each year from April 2019.
*top tip – keep an eye on our blog for updates on Making Tax Digital.
*ultra top tip – if you’re not using online accounting software yet, get in touch with us now to see how we can help you make the move. Don’t leave it til April 2018!
WHAT TO DO NEXT:
These are the major changes in the Budget 2017, but please download our App for full Budget Announcements, including tax and NIC rates and allowances from April 2017.
Thanks for reading! If you have any questions at all, please get in touch.
