​This week the Chancellor made his autumn statement – this is the first ‘budget’ since the Brexit vote in June.  

Many ‘think tanks’ had called for stability in the business taxation environment and this has largely been delivered. 



​There are however changes coming in the areas of personal taxation and self employment:

• Increasing the planned the point at which people pay tax (National Insurance has lower thresholds)
• Confirming the abolition of Class 2 National Insurance from 2018
• Stabilising the corporate tax environment and confirming that Corporation Tax will reduce to 17% by 2020
• Reform of the Vat flat rate scheme to include a new 16.5% rate
• An increase in Insurance Premium Tax from 10% to 12%

 
HMRC is to receive further investment to police the National Minimum and Living wages.  There are also likely to be further HMRC activity on the employment status of freelancers.  I will be reviewing my fee protection arrangements over the coming weeks and be communicating them to clients - it's never been more important to have something in place to ease the burden of a tax investigation!
 
Don't forget, this newsletter is designed to draw attention to specific topical issues and is in no way intended to provide advice tailored to your business - advice must always be sought before acting on any item featured.

What's New and What's Changed?

• Personal Allowances & National Insurance

• VAT Flat Rate

• Employing People

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​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 2016, 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.  National Insurance entitlement will be included in the Class 3 or 4 contributions.  The Chancellor made reference to self employed individuals not paying equal taxes and it now would appear highly likely that the rate of Class 4 National Insurance could increase to 12% to align with employees.
 
There are no changes to the new dividend tax and several references were made to ‘tax driven incorporations’ and ‘disguised employment’ so we can expect to see more HMRC activity in this area.

The government will introduce a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses (‘limited cost traders’).  The highest rate is currently 14.5%. 



The definition of a limited cost trader is one whose VAT inclusive expenditure on goods is either:

• less than 2% of their VAT inclusive turnover in a prescribed accounting period
• greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)

 
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
 

• capital expenditure
• food or drink for consumption by the flat rate business or its employees
• vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services)

 
These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.  As there are a number of flat rate clients, more detail can be found at the following link: VAT

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​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. 
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​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.
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