Many reports over the weekend suggested that as we move to an Autumn Budget from this year onwards, that this budget would be a bit of a non event. With so many changes in the offing already a ‘non event’ would have offered some breathing space however there some new changes which will affect almost every reader in the next year or two! I’ve therefore decided to pull together a refresher of the changes that we already know about plus the new things announced in the budget:
- Increasing the planned the point at which people pay tax (National Insurance has lower thresholds)
- Making tax digital – some relaxation of the timescales
- Corporation Tax reductions to 17% by 2020
- The VAT registration threshold rises to £85,000 from April
- Increasing Self Employed Class 4 National Insurance from 6 April 2018 to 10%, then to 11% in the following year
- Reducing the new £5,000 dividend allowance to £2,000 from April 2018
- 2 new useful allowances for trading and property
- Reform of the Vat flat rate scheme to include a new 16.5% rate – I’ve mentioned this a couple of time already but it is an important change
- Minimum Wage reminder
Whilst very little was said about it, undoubtedly the biggest area of focus over the next 12 months will be ‘making tax digital’ which will bring a major shift in the way in which we file tax returns and submit data with much tighter deadlines. This has to date been running very much under the radar but will bring ‘VAT return’ type processes to tax returns to many sole traders and ultimately companies. My recommendation to sole traders is initially is to start ‘shadowing’ this process during the next tax year and move record keeping to apps and software as its very unclear what free software will be available from HMRC.
Personal Allowances & National Insurance
The point at which people will pay income tax rises to £11,500 for 2017/18 which is some £500 higher than the current year. From April 2017, spouses and civil partners may transfer £1,150 of their personal allowance to each other. The point at which people pay higher rate tax has risen and will be £45,000 for 2017/18.
The thresholds at which people pay National Insurance have not risen as significantly so employees can still expect to pay National Insurance even if there is no tax to pay – this will kick in at £157 per week (£8,164 per annum). The Employment allowance continues at £3,000. This excludes single director / employee companies who can't claim it.
Class 2 National Insurance continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2018 and then the increase in Class 4 takes effect. If you’re self employed and plan to take maternity pay, this new collection process has caused some issues in gaining full entitlement to SMP and it is worth speaking to HMRC early and paying your Class 2 contributions up front.
The point at which people will pay income tax rises to £11,500 for 2017/18 which is some £500 higher than the current year. From April 2017, spouses and civil partners may transfer £1,150 of their personal allowance to each other. The point at which people pay higher rate tax has risen and will be £45,000 for 2017/18.
The thresholds at which people pay National Insurance have not risen as significantly so employees can still expect to pay National Insurance even if there is no tax to pay – this will kick in at £157 per week (£8,164 per annum). The Employment allowance continues at £3,000. This excludes single director / employee companies who can't claim it.
Class 2 National Insurance continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2018 and then the increase in Class 4 takes effect. If you’re self employed and plan to take maternity pay, this new collection process has caused some issues in gaining full entitlement to SMP and it is worth speaking to HMRC early and paying your Class 2 contributions up front.
Making Tax Digital
This is the biggest step change self employed people will have seen for many years. The new quarterly reporting regime for self employed people earning has been relaxed by 1 year for businesses with sales less than the VAT threshold - £85,000 from 1 April. This will be the subject of a future newsletter and I will be actively working to prepare clients for the change which will ultimately affect all businesses with sales over £10,000. As I mentioned above, you should consider shadowing this process with appropriate accounting software.
This is the biggest step change self employed people will have seen for many years. The new quarterly reporting regime for self employed people earning has been relaxed by 1 year for businesses with sales less than the VAT threshold - £85,000 from 1 April. This will be the subject of a future newsletter and I will be actively working to prepare clients for the change which will ultimately affect all businesses with sales over £10,000. As I mentioned above, you should consider shadowing this process with appropriate accounting software.
A Tale Of 2 Allowances
Two useful £1,000 allowances come into force from 6th April:
Where the allowances cover all of the income (no expenses are ever allowed) then they you no longer have to declare or pay tax on this income. In its simplest form if you rent out your garage to someone for £60 a month then this would no longer need to be put on your tax return. There is quite a bit more to this particularly where people have a main sole trade and a ‘hobby business’ and the detail can be found on the following link HERE
Two useful £1,000 allowances come into force from 6th April:
- one for trading and
- one for property income
Where the allowances cover all of the income (no expenses are ever allowed) then they you no longer have to declare or pay tax on this income. In its simplest form if you rent out your garage to someone for £60 a month then this would no longer need to be put on your tax return. There is quite a bit more to this particularly where people have a main sole trade and a ‘hobby business’ and the detail can be found on the following link HERE
VAT Flat Rate - Reminder
Announced in the Autumn Statement, a change to the flat rate scheme will come into force 1 April 2017. This is likely to affect almost 30% of businesses using the scheme. I have prepared a handy guide to the changes which can be found by watching below or clicking on this link.
HMRC updated their VAT Notice earlier this month and the link can be found here.
Announced in the Autumn Statement, a change to the flat rate scheme will come into force 1 April 2017. This is likely to affect almost 30% of businesses using the scheme. I have prepared a handy guide to the changes which can be found by watching below or clicking on this link.
HMRC updated their VAT Notice earlier this month and the link can be found here.
Minimum Wage Reminder
National Minimum and Living Wages will increase from April 2017. Further funding has also been earmarked for HMRC to proactively compliance check higher risk employers. The changes are as follows:
There will also be changes made to the way in which things like salary sacrifice schemes work but this will exclude things like pensions and childcare where no changes are envisaged.
As always... If any of my clients have any questions, please feel free to contact me or call to discuss your concerns. Or if you like many others are looking for a local and friendly accountant to help you cut through the red tape, I'd love to hear from you.
National Minimum and Living Wages will increase from April 2017. Further funding has also been earmarked for HMRC to proactively compliance check higher risk employers. The changes are as follows:
- Increase the living wage from £7.20 to £7.50 per hour
- increase the rate for 21 to 24 year olds from £6.95 to £7.05 per hour
- increase the rate for 18 to 20 year olds from £5.55 to £5.60 per hour
- increase the rate for 16 to 17 year olds from £4.00 to £4.05 per hour
- increase the rate for apprentices from £3.40 to £3.50 per hour
There will also be changes made to the way in which things like salary sacrifice schemes work but this will exclude things like pensions and childcare where no changes are envisaged.
As always... If any of my clients have any questions, please feel free to contact me or call to discuss your concerns. Or if you like many others are looking for a local and friendly accountant to help you cut through the red tape, I'd love to hear from you.
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