As the last Spring Budget to be held, the Chancellor unsurprisingly made it a short one. Unfortunately, of the little that was discussed, small businesses seem to have been affected the most – so it’s time to pay attention.
National Insurance Rates
Most notable was the increase in national insurance contributions by self-employed and small business owners. Class 4 NICs for the self-employed will increase to 10% in April 2018, and 11% in 2019. It should be remember that Class 2 will be abolished in April 2018 saving the self- employed the grand sum of £148.20.
Under the new legislation, the Treasury claims only those who earn more than £16,250 will pay more. And while it is ‘promising’ that the majority will see a reduction, we can’t overlook the amount of people this will affect.
Philip Hammond also went into detail regarding measures to reduce the pressure of the changes to small business rate relief. Procedures include a £50 monthly cap on the maximum increase, a £1,000 discount for pubs with a rateable value below £100,000 and a £300m fund for discretionary relief for struggling businesses.
Whilst these are welcome changes, there is certainly a long way to go and many small businesses may still be at risk.
Taxation of Dividends
Less than a year after the introduction of the new £5,000 tax free dividend allowance, the Chancellor has announced that it will reduce to £2,000 from 6 April 2018. So as no tax is payable if the dividend income is now less than £2000, the attraction to incorporate small businesses is gradually being eroded.
It’s not all Doom and Gloom
We can’t ignore some of the silver linings that came out of this statement. The main Personal allowance will increase by £500 to £11,500 in April which was a much-welcomed change. And those concerned about quarterly Tax Returns can find some respite, as small business under the VAT threshold will have a year before it comes into effect for them.
If you’re unsure or concerned about how any of these changes may affect you or your business, you can contact me here.