Corporation tax rates
As announced previously, corporation tax will fall to 19% from 1 April 2017 and then to 17% from 1 April 2020. These rates were confirmed in Spring Budget 2017.
Corporate Capital Gains tax
Currently, companies are allowed an allowance for inflation (‘indexation allowance’) when they sell capital assets, based on the increase in the retail price index over the period of ownership of the asset.
The Chancellor announced that this indexation allowance will be frozen for disposals after 1 January 2018 at the amount that would be due based on the Retail Price Index for December 2017.
This means that companies will pay more tax on their capital gains.
National Insurance (NI) for the self employed
Class 4 National Insurance (paid as a percentage of profits) were due increase from 9% to 10% from April 2018 and then 11% from April 2019 following the Spring Budget, but the Chancellor did a u-turn shortly after the Budget and the increase will not go ahead.
Although he confirmed in the Spring Budget that Class 2 National Insurance (paid at a weekly flat rate by the self employed) would be abolished from 6 April 2018 , it was announced earlier this month that the abolition will now not take place until 6 April 2019.
Class 2 NI will be £2.95 per week for 2018-9 and will continue to be collected via self assessment tax returns.
New allowances for property and trading income
It was announced in the Spring Budget that, from April 2017, two new tax-free £1,000 allowances would come into effect – one for selling goods or providing services, and one income from property.
The legislation for this is currently still working its way through parliament (having been delayed by the General Election), but will apply retrospectively from April 2017 (assuming it is passed).
The new allowances will mean that individuals with property income below £1,000 or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance from their gross income.
Again, announced in the Spring Budget – the nil rate dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
The legislation for this is currently still working its way through parliament (having been delayed by the General Election).
A reminder that the new rates of tax on dividend income above the allowance of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers started from 6 April 2016, so will start to hit those with dividends in excess of £5,000 in tax returns they will be completing soon for 2016-17. If you have dividends in excess of £5,000 and are not already completing a tax return, you will need to ask HMRC to issue one.
Making Tax Digital
Making Tax Digital (MTD) has been going through consultations over the past year or so.
Under the scheme, limited companies, unincorporated business and landlords will have to use online software to report their income and expenses to HMRC at least quarterly.
The requirements were due to come into effect from April 2018 for unincorporated businesses and landlords with turnover (ie income before costs) of £10,000 or more, but the Chancellor announced in the Spring Budget that implementation will be delayed until April 2019 for those with turnover under the VAT threshold.
A further delay was announced in July 2017 such that the start date is delayed until April 2019 for businesses with a turnover above the VAT threshold and at least April 2020 for other businesses.