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.
National Insurance (NI) for the self employed
Class 4 National Insurance (paid as a percentage of profits) will increase from 9% to 10% from April 2018 and then 11% from April 2019.
The Chancellor’s justification for this increase is that the benefits of paying national insurance for the self employed are becoming more closely aligned with the benefits for employees, in terms of pensions.
The main difference in benefits between employed (class 1) and self employed (class 4) national insurance now relates to ‘parental benefits’ – ie maternity, paternity and adoption pay, and the Chancellor announced a consultation on whether there is a case for greater parity on these between the employed and self employed.
He also confirmed that Class 2 National Insurance (paid at a weekly flat rate by the self employed) will be abolished from 6 April 2018.
New allowances for property and trading income
From April 2017, two new tax-free £1,000 allowances come into effect – one for selling goods or providing services, and one income from property.
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.
The nil rate dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
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.
There has been a business rates review, which has left many businesses with increased rateable values and significant increases in their rates bills. The Chancellor has guaranteed that no business coming out of the small business rates relief will see their rates bill go up by more than £50 per month. Local authorities will also have a fund to help those in real hardship.
Good news for pubs – they will receive a £1,000 discount on their rates bill for 2017 if they have a rateable value of less than £100,000.
As previously announced, from 1 April 2017 the small business rates relief will double from 50% to 100% and the threshold will increase from £6,000 to £12,000.
This means that businesses occupying property with a rateable value of £12,000 and below pay no business rates. Those with a rateable value of between £12,000 and £15,000 will receive tapered relief.
Making Tax Digital
Making Tax Digital (MTD) has been going through consultations over the past year.
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 Budget that implementation will be delayed until April 2019 for those with turnover under the VAT threshold.
So, the timetable for MTD now stands as:
April 2018 – unincorporated business and landlords with turnover over the VAT threshold
April 2019 – unincorporated business and landlords with turnover over 10,000 but below the VAT threshold
April 2019 – VAT registered businesses
April 2020 – limited companies
Businesses and landlords with turnover less than £10,000 are exempt from the requirements (presumably unless they are registered for VAT).