Yes, there has been another Budget. In the last 12 months George has stood up in the House of Commons to deliver Budget 2015, Summer Budget 2015, Autumn Statement 2015 and now Budget 2016. I see more of George Osborne than I do some of my relatives and that it not a good state of affairs.
Anyway, back to business. As is our custom, we set out below the 5 main tax changes likely to be of interest to our clients. And this year narrowing it down to 5 has not been an easy task (actually I’ve cheated a bit by lumping lots of tax rates and allowances changes into the first category).
Changes in tax rates, etc.: Yet again, George announced a reduction in the rate of corporation tax, taking it down to 17% from April 2020. In addition, there are significant reductions in the rates of CGT (but not for disposals of residential property) and business rates; an increase in the Income Tax personal allowance; and a raising of the threshold for the higher rate of Income Tax – all from April next year. As a result of these changes, we expect most of our clients to have more money in their pockets in the years to come.
The abolition of Class 2 NICs. This will save the self-employed £134 a year from April 2018 but it may not be all good news. There will be a consultation on changes to Class 4 NICs payable by the self-employed on their profits and it may be that the rate of Class 4 NICs increases.
Entrepreneurs’ relief (ER). ER can mean that tax is paid at the rate of 10% when a business is sold. Yesterday, the Chancellor rolled back some changes he made last year which restricted the availability of ER on a business disposal. This is welcome news and may benefit quite a few of our clients when they come to sell or retire. We are particularly proud of this one as we played a part in the Chartered Institute of Taxation’s campaign to reverse the 2015 changes.
IR 35 and the public sector. Tax bills can be reduced if a worker is engaged on a sole-trader basis, or through his/her own personal service company, rather than as an employee. IR 35 is there to stop this but it has been ignored by many employers in recent years, mainly because the risk falls on the worker. The rules are to be amended so that where the engager is a public sector body, that body takes on the IR 35 risk. In recent years, we have seen a number of universities, councils, etc. insist that people who should be employees provide their services through a limited company. This puts the worker in a difficult position, and can leave them worse off given the costs of running a company. Hopefully, this will now stop, and mean that some of our clients can sleep more soundly at night!
New tax exemptions for small trades and property businesses. From April 2017, an individual with trading income of less than £1k will not need to declare that income or pay tax on it. The same applies with regard to property income. The key point to note here is that the exemption applies where income is £1k or less; i.e. not profits. Therefore, it is unlikely to be a great deal of use other than to allow the Chancellor to claim he made life simpler for ‘micro-entrepreneurs’.
And that is that until December when George will appear again to deliver Autumn Statement 2016.
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