Business Rates - Celebrations for small business owners?
Does George Osborne's budget announcement come with reason to celebrate for small business owners? Well, don't make a gin and tonic.
For around 600,000 small business, there maybe a temptation to raise a glass to Mr. Osbourne, no matter how unpalatable that may seem for some, when their zero rated business rates kick-in next year, but just make sure it’s not a Gin & Tonic.
This news, the highlight for many small business owners, has been somewhat overshadowed by the news that there will be a new sugar tax applied to soft drinks. Whether this will go any way to reducing childhood obesity in this country is now a hotly trending topic on social media, as is the side effect of increasing the cost to adults of soft drink mixers, such as tonic water - there’s always the slimline option though.
So, even if the Chancellor wants to sugar coat bad news in the future, he may have to pay for it.
Business Rates - Small business owners benefit
It’s truly excellent news for a lot of small business owners as they could see savings of nearly £6,000 a year.
However, this is still overshadowed by the introduction from April onwards of the new dividend tax scheme. This sees the scrapping of the notional 10% tax credit on dividends and the introduction of a £5000 tax free allowance on dividends. Above this level dividends will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate).
More welcome news is that corporation tax will drop to 17% by 2020.
Capital Gains Tax - Investors also given a helping hand
The higher rate of tax on capital gains will reduce from 28% to 20%, while the lower rate will see a reduction from 18% to 10%. This is particularly good news for investors looking to sell shares. This doesn't apply to residential property, but does happy to the sale of equity in businesses.
Also, capital gains on newly-issued shares in unlisted companies, kept for at least three years, will be capped at 10% with an allowance up to £10 million.
Highlights
- Corporation tax to be cut to 17% from 2020
- Capital gains tax slashed by 8% for both top rate and basic rate taxpayers
- Small business rate relief to increase from £6000 to £15000. They will also be linked to CPI and will track inflation.
- Personal allowance increase to £11,500 and the higher rate, 40% threshold, will increase to £45,000.
- CGT earned from small business investment will be capped at 10%.
- ISA extension to £20k
Issues To Watch
Trading income received in non-monetary form.
Exchanges that don't involve cash, receivables or payables is the target of new legislation being introduced. Trading receipts at their full value will be taken into account for tax purposes.
Partnership taxation
Consultation is set to begin on how partnerships calculate their tax liabilities. This may have an impact of the company structure you choose when starting out.
The administration of tax on employee benefits and expenses
The government plans to introduce a package of measures that will hopefully make the process of administering employee benefits and expenses a simpler task.
Salary sacrifice
Considering is being given to the practice of salary sacrifice, where employees can give up salary in return for ‘benefits-in-kind’. The government is looking to limit the range of benefits that attract income tax and NICs advantages under such schemes.
Find out more
If you're interested in finding out more on George Osborne's Budget, take a look at the following:
Budget 2016: Key Takeaways for Contractors
Budget 2016: Key Takeaways for Companies
Budget 2016: Impact on Individuals
Alternatively, if you'd like some friendly advise on the current reforms and are looking for help taking your business forward, feel free to get in touch via our contact form.
Budget 2016: Key Takeaways for Contractors
Following on from this morning’s summary on the key talking points from Budget 2016 for individuals, below we’ve summarised the key talking points for contractors from Chancellor of the Exchequer George Osborne’s eighth full Budget.
Keep an eye out for our article summarising Budget 2016 for small and medium-sized businesses (SMEs), coming later today.
New Tax Allowances for ‘Sharing Economy’ Workers
One of the biggest takeaways from Budget 2016 from the point of view of contractors was that the Chancellor has, finally, recognised how traditional taxation methods have been having a negative impact on contractors earning small and one-off payments as part of the sharing economy.
Speaking to the House of Commons, Mr. Osborne said:
“We’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet. Our tax system should be helping these people so I’m introducing two new tax-free allowances each worth £1,000 a year, for both trading and property income.”
The Chancellor continued by noting that there will be no forms to fill out in order to benefit from this tax break, before claiming that at least 500,000 people will benefit from this change.
Class 2 National Insurance Contributions for the Self-Employed to be Scrapped
The other big announcement, from the point of view of contractors, was that Class 2 National Insurance contributions (NICs) for the self-employed are due to be abolished from April 2018 in favour of the benefits of Class 2 NICs (primarily entitlement to the State Pension) being combined with the benefits of paying Class 4 NICs.
Currently costing contractors and self-employed individuals making a profit of £5,965 or more per year £2.80 per week, from April 2018 you will only be required to pay Class 4 NICs, though it is unclear whether the current weekly cost of Class 2 NICs will transfer directly to the new Class 4 NICs.
Business Rates Abolished for Properties With Value up to £12,000
One of the biggest talking points from Budget 2016 was that of business rates being abolished for all business (commercial) properties with a rateable value up to £12,000, from April 2017. There will also be a ‘tapered’ relief rate on properties between £12,001 and £15,000.
With the current relief rate set at just £6,000, this poses a hugely beneficial increase for small businesses and contractors working from a commercial space. The government estimate that under the new rules 600,000 small businesses will pay no rates at all.
Personal Allowance to Increase to £11,500
Touched upon in this morning’s key talking points for individuals summary, and seen equally as a boon for contractors, from April 2017 the personal allowance will increase to £11,500 (after rising to £11,000 next month).
The personal allowance was just £6,500 when the Conservatives were elected six years ago, displaying an almost 100% increase.
Understanding Budget 2016
To speak with a professional accountant to discuss the impact of Budget 2016 on you as a contractor, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
More Information
If you're interested in the Budget 2016 changes and the impact they'll have on you, feel free to check out our other pieces on the impacts of George Osborne's changes:
Budget 2016: Key Takeaways for Companies
Budget 2016: Key Takeaways for Individuals
Budget 2016: Key Takeaways for Companies
Following on from this morning's summaries on the key talking points from Budget 2016 for individuals and contractors, below we’ve summarised the key talking points for companies from Chancellor of the Exchequer George Osborne’s eighth full Budget.
Focusing on small and medium-sized businesses (SMEs), this is the final part in our article series on Budget 2016. To speak with us directly about this year’s Budget, or for anything else, our contact details are at the end of this article.
New Stamp Duty Rates for Commercial Properties
Coming into effect at midnight on 17 March/last night, the new stamp duty rates for commercial properties represent a complete overhaul in the way in which stamp duty on freehold commercial property and leasehold premium transactions is calculated.
A boon for small and medium-sized business (SME) owners, under the new rules instead of stamp duty rates applying to the whole value of a commercial property, Mr. Osborne described how the new rates and tax bands will result in a 0% stamp duty rate for commercial property up to the value of £150,000, with a 2% rate applying for the portion of a commercial property’s value between £150,001 and £250,000, and a 5% rate applying for the portion above £250,000.
Business Rates Abolished for Properties With Value up to £12,000
We touched upon this in our key talking points for contractors summary, though it’s more relevant for companies than it is contractors. One of the biggest talking points from Budget 2016 was that of business rates being abolished for all business (commercial) properties with a rateable value up to £12,000, from April 2017. There will also be a ‘tapered’ relief rate on properties between £12,001 and £15,000.
With the current relief rate set at just £6,000, this poses a hugely beneficial increase for small businesses and contractors working from a commercial space. The government estimate that under the new rules 600,000 small businesses will pay no rates at all.
Employers to Pay National Insurance Contributions on Pay-Offs
If you have taken on employees at your SME, from April 2018 you will need to pay National Insurance Contributions (NICs) on any pay-offs (typically employee termination payments) you make above £30,000.
As is currently the case, should you have to make an employee’s position redundant that employee can receive a pay-off from you of up to £30,000 without you or they having to pay NICs on that amount.
Corporation Tax to Reduce to 17% by 2020
Though it’s a little while off yet, at yesterday's Budget the Chancellor announced that Corporation Tax is due to drop from 20% to 17% by 2020.
Should this reduction come to fruition it will mark a particularly low Corporation Tax rate, given that it was 28% when the Conservatives came to power in 2010. At it’s current rate of 20%, the UK has the lowest Corporation Tax rate in the G20.
Understanding Budget 2016
To speak with a professional accountant to discuss the impact of Budget 2016 on your company, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
If you're an individual or contractor, you needn't go to the trouble. Check out our pieces that are best suited to you:
Budget 2016: Key Takeways for Contractors
Budget 2016: Key Takeaways for Individiuals
Budget 2016: Impact on Individuals
Yesterday, Wednesday 16 March 2016, Chancellor of the Exchequer George Osborne delivered his eighth full Budget to the House of Commons since the Conservatives came into power in 2010; his second since the party’s majority win in May of last year.
Below we’ve summarised the key talking points from Budget 2016 for individuals. You’ll note what the Guardian call a number of “voter-wooing measures” in our summary. With the Brexit vote scheduled for 23 June, the Conservatives were adamant that the forecasts they presented yesterday are predicated on the UK remaining within the European Union.
Keep an eye out for our articles summarising the key talking points from yesterday’s budget for contractors and, separately, small and medium-sized businesses (SMEs), both of which are coming later today.
Personal Allowance to Increase to £11,500
At Budget 2016 Mr. Osborne announced that the Personal Allowance will increase to £11,500 in April 2017, with the higher rate threshold jumping to £45,000.
Before then, however, the current personal allowance of £10,600 is set to rise to £11,000 next month, with the higher rate threshold rising from £42,385 to £43,000.
Capital Gains Tax (CGT) to Reduce from 28-20%
From 6 April 2016 (just three weeks’ time) Capital Gains Tax (CGT) will be reduced from 28-20% for higher rate earners; 18-10% for those paying the basic rate.
Residential property will, however, still be taxed at its current rates, with an eight percent surcharge being payable on top of the new CGT for the residential property itself, and any carried interest that it holds, thus bringing both CGT tax rates back to their former percentage values for residential properties respectively.
ISA Allowance Increases to £20,000, and New Lifetime ISA
From April 2017 the total amount you can save into all ISAs in a given year will increase from £15,240 to £20,000.
The government also announced a new Lifetime ISA which, from April 2017, will allow any adult under the age of forty to save up to £4,000 per year while receiving a 25% bonus on this money from the government. Any money put into your Lifetime ISA can either be saved until you are over sixty and used in your retirement, or withdrawn to purchase a home, if doing so will turn you into a first-time homeowner.
Sugar Tax
In a surprise move the Chancellor has imposed a levy on soft drinks with a total sugar content above 5 grams per 100 millilitres (and an even higher levy for drinks with more than 8 grams per 100 millilitres), from April 2018.
Television chef Jamie Oliver, who has campaigned for a sugar tax for many years (and who personally introduced one in his own restaurants), said yesterday “I never thought they’d do it.” The government noted that the approximately £520m to be raised from the tax will go towards funding school sports programs.
Longer School Days Available to 25% of Secondary Schools
Talking of schools, up to £285 million of funding (some of which coming from the above-mentioned sugar tax) will be set aside to give 25% of secondary schools across the country the option to opt in for longer school days from September 2017, should they so wish.
This comes in tandem with funding aimed at turning every primary and secondary school in the country into an academy by 2022.
Fuel and (Most) Alcohol Duty Frozen
Last in our summary comes a few aforementioned “voter-wooing measures”, including fuel duty being frozen for the sixth year in a row, a measure which the government estimate will save the typical motorist £75 a year.
Rates on spirits, beer, and the majority of ciders will also be frozen for the 2016-17 tax year, and in a measure likely intent on wooing Welsh voters, the crossing toll on the Severn Bridge will be cut in half, down to £3.30.
Understanding Budget 2016
To speak with a professional accountant to discuss the impact of Budget 2016 on you as an individual, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
If you're a company or contractor, you needn't go to the trouble. Check out our pieces that are best suited to you:
Budget 2016: Key Takeways for Contractors
Budget 2016: Key Takeaways for Companies