We are now nearly a year into the new dividend tax changes which have seen tax planning for businesses turned on its head. With the future reductions in the corporation tax rates, which begin this April it, looked likely that it was still better to trade through a limited company rather than a sole trader or partnership. The Spring 2017 Budget has hit all areas of business meaning another review to advice given to new businesses. This is done through the abolition of Class 2 National Insurance (as previously announced) for sole traders and partnerships and the reduction of the dividend tax free band for shareholders. Doubtless this will not be the last we see of changes to business taxation as it appears to be a hot topic for this government.
Below are some key points in the 2017 Spring Budget. Please do get in touch if you need any further information or have any concerns.
Individuals
The income tax thresholds will be as follows:
| 2017-18 | |
|---|---|
| Personal allowance | £11,500 |
| 20% band | £33,500 |
| 40% band | £150,000 |
| 45% thereafter |
NB those earning over £100,000 will not get the full tax free personal allowance.
National insurance – Currently, the self-employed may have to pay both Class 4 and Class 2 NICs:
– Class 4 NICs at 9% are paid on profits between £8,060 and £43,000
– Class 2 NICs are paid on profits of £5,965 or more
From 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.
Taken together, only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.
Savings and investments
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018
The Lifetime ISA will be available from 6 April this year. The Lifetime ISA will allow younger adults to save up to £4,000 each year and receive a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
Businesses
Corporation Tax rates reduce to 19% from April 2017 moving to 17% from 2020.
Small Businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD)
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory.
Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
£435 million to support businesses affected by the business rates relief revaluation. This means no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016-17. Funding for local authorities will allow them to provide £300 million of discretionary relief to provide help to businesses most affected by the revaluation.
And from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.
Families
Tax-Free Childcare will soon be available to working parents
Tax-Free Childcare will provide up to £2,000 a year in childcare support for each child under 12. Parents will be able to receive up to £4,000 for disabled children up to the age of 17.
Parents of younger children will be able to apply for the scheme first, with all eligible parents able to access the scheme by the end of the year.
Working parents in England will also be able to apply for an additional 15 hours of free childcare for