On Wednesday 22nd November 2017 the chancellor of the exchequer Philip Hammond delivered the 2017 Autumn Budget.
Although there were no major surprises for small business in this article we cover the key changes from the budget that may affect you over the coming years.
The amount that an individual can earn tax-free will rise to £11,850 from 6th April 2018 (currently £11,500). This continues the general trend to increase this allowance year-on-year and the allowance is expected to reach £12,500 by 2020.
Higher rate tax threshold
The point at which income moves into the higher rate tax band has increased to £46,350 from £45,000 from 6th April 2018 . As with the personal allowance, further increases are expected to this threshold over the coming years with a government target of £50,000 by 2020.
Back in the Spring 2017 budget it was the proposed changes to national insurance for self-employed individuals that grabbed the headlines – however the government quickly back-tracked on those proposals and Class 4 national insurance contributions will remain at 9% (basic rate) / 2% (higher rate) for 2018-19.
When it comes to Class 2 national insurance, the government has delayed the abolition of this until April 2019.
The headline rates of corporation tax for 2018-19 remain as they are for the current year at 19%. There are discussions around the proposal for this to fall further still to 17% from the tax year beginning 1 April 2020.
The dividend allowance currently allows the first £5,000 of dividends that would otherwise be taxed to be paid tax-free. This is proposed to decrease to £2,000 from 6th April 2018 however we are waiting for final confirmation of this.
The VAT registration threshold will remain at £85,000 for 2018 and 2019.
Major changes to the way the IR35 rules operate for people working through their own personal service companies within the public sector came in from 6th April 2017. The main change was that the decision about whether IR35 applied moved from the person providing the services (the contractor/freelancer) to the client receiving the services.
There was much speculation that the government would look to roll these changes out into the private sector from April 2018, however they are taking a more measured approach and there will be a consultation around IR35 and the private sector so for the time being there are no changes to the private sector and you can refer to our IR35 guide.
Please contact us for further guidance.