The Budget generated plenty of noise. Now, let’s look at the substance
NEIL MOON, Director of Tax at Page Kirk looks back at Philip Hammond's recent Budget statement and considers its implications for local businesses and individuals.
Although there were fewer concrete measures in the Chancellor's Spring Budget than we saw in his predecessor's final appearance in front of the dispatch box, there was no shortage of controversy in the press.
Philip Hammond had originally announced that Class 4 National Insurance Contributions (NICs) would increase to 10% in April 2018 and 11% in April 2019. The move was designed to level the playing field between the self-employed and those in regular employment, but political opposition from backbench MPs and a lot of adverse coverage in the media led to the idea being dropped within a week.
While this u-turn was obviously good news for sole traders, it may be that you run your own limited company, having been advised previously that it's a tax efficient way of managing your affairs. The Chancellor signalled a tough line, as he feels too many people are incorporating for tax purposes. The dividend tax is already in operation, but after just one year, he reduced the tax-free sum that can be taken in company dividends from £5,000 to £2,000 – a change which takes effect from next April.
If you have any concerns over your current status as a company director and shareholder, it's probably a good point to have a discussion with your accountant.
There does seem to be some good news on the horizon though too.
The Chancellor announced that the rate of corporation tax is set to be reduced to 17% by 2020. What's more, there will be a reduction in the red tape attached to tax credit claims for R&D – an excellent incentive for larger businesses or start-ups looking to innovate. We often help our clients with the claims process, so again, my advice is to get in touch at the earliest opportunity.
On the general state of the economy, Mr Hammond was – as we might expect – upbeat on growth and deficit reduction, despite the uncertainties created by Brexit. A big initiative for the wider economy, which may interest a number of businesses, was the proposed introduction of ‘T-Levels' from Autumn 2019. These are standardised technical qualifications for 16-19 year-olds, designed to be a parallel to the more academic A-Level route pursued by other youngsters.
It's worth remembering that the Making Tax Digital process is now well under way and will require all businesses and landlords with income exceeding £10,000 to file returns online on a quarterly basis from April 2018. For the smallest businesses, this presents new challenges, as old-style bookkeeping systems are unlikely to be enough to satisfy the Revenue's requirements any more. The Chancellor announced that for businesses with turnover below the VAT threshold (£85,000 from April 2017) the changes will be delayed until April 2019. Companies will need to file quarterly returns from 2020.
Finally, if you're planning for the long-term with your personal savings, the new Lifetime ISA and three-year NS&I investment bonds are worth considering. Page Kirk Financial Services LLP are authorised to offer advice.
We have extensive experience of dealing with all accountancy issues at Page Kirk LLP and would be pleased to talk to you concerning your current or intended business. Please call us on 0115 955 5500 for a no-obligation consultation, free of charge.