March 2017 saw the Chancellor deliver his last spring budget announcement, with the new Autumn Budget set to be delivered in November 2017.
Announcements were tempered by the continuing theme of “slow and steady”, although a rapid U turn was performed just days after the budget when the proposed National Insurance rises were scrapped.
Initially it was reported that a 1% rise in Class 4 national insurance would be applied to Self-employed workers from April 2018 with a further 1% the following year. This was required in order to align the rates of National Insurance more closely with employed workers and follows on from the abolition of the class 2 contribution from April 2018. However, as this was at odds with the general understanding of the “Tax Lock” introduced by David Cameron the Chancellor has withdrawn these increases.
The remainder of the budget was without surprises and mostly confirmed tax rates and allowances which had already been suggested by the autumn statement. The Personal Allowance for individuals in 2017/18 is set at £11,500 rising from £11,000 in 2016/17. The higher rate threshold is set at £33,500 for 2017/18 up from £32,00 in 2016/17.
For Companies the Corporation Tax rate was confirmed as 19% for the financial year to 31 March 2018. There was some expectation that this may be lowered further, which did not materialise this time around. The Chancellor will reduce the tax free dividend allowance from £5,000 in 2017/18 to £2,000 in 2018/19 to reduce the tax benefits of incorporation for small businesses.
For those businesses with property, there was small comfort in the form of reliefs to offset the increasing business rates revaluation, including a cap of £600 on the allowable increase in the total charge from 2016/17 to 2017/18.
In respect of the Government’s plans regarding digital tax accounts there was great relief as the Chancellor confirmed an increase in the threshold to £83,000 ( the VAT registration threshold) for small business and a delay of 1 year to 5 April 2019 for small business entering the online reporting scheme. This is needed in order to give small businesses sufficient time to plan their entry into the scheme and obtain advice regarding the set up of the necessary computerised systems.
There were also confirmations regarding the move to the cash basis of accounts for small businesses with the threshold being increased from £83,000 to £150,000 from 1 April 2017.
Landlords will also now be required to follow the cash basis from 6 April 2017 unless gross annual rents from a property business exceeds £150,000 or they specifically opt out of the scheme.
If you would like any further advice regarding any of the issues raised above or in the wider budget coverage please contact one of our team who will be happy to assist.