It was Phil Hammond’s first Autumn Statement since becoming Chancellor and it will be his last, as the usual spring budget is moving to the autumn from 2017.
There was lots of talk about productivity and where our gross debt is at present, but for you – our small business and individual clients, here are Moore Accountancy’s main highlights:
Increase in Personal Allowance (PA) and Higher Rate Tax (HRT) threshold
For 2016/17, the PA is £11,000 and the HRT is currently for income levels over £43,000.
Next year (2017/18) this shall rise to £11,500 and £45,000 and the eventual aim is to ensure that the PA increases to £12,500 and the HRT to £50,000 by 2020. After this point the PA is planned to rise in line with the Consumer Price Index.
An increase to these allowances is always good news for both individuals and small business owners.
National Living Wage
This was introduced last year and is separate to the National Minimum Wage. This will go up from £7.20ph to £7.50p from April 2017. Read our previous article about the differences between the two.
This is a positive thing for the country and should boost the flow of cash in the economy, although it will be an added burden for micro businesses.
Salary Sacrifice Schemes to be removed
From April 2017, any salary sacrifice schemes (aside from schemes relating to pensions, cycle to work, low emission cars and childcare) will be abolished. These include gym memberships, school fees, private health insurance, accommodation, company cars and car parking.
This does not affect many of our owner managed businesses, but if you are an employee of a large organisation, then we suggest you take up salary sacrifice schemes before April 2017 and benefit for a further year of reduced NIC and tax. After April 2018 these will no longer be protected.
Those individuals who have been prudent over the years and saved their pennies have been hit hard over the last couple of years with interest rates at a record low.
The government will be launching a new National Savings & Investment bond which allows savers to save up to £3000 over a 3 year period. It aims to offer a market leading rate. It should be launched in the spring.
In addition to this, those savers who are basic rate with more than £1,000 worth of gross interest, or higher rate with more than £500 worth of interest should continue to look at utilising ISAs. The threshold has been increased to £20,000 per annum effective from 6/4/17.
Corporation Tax rates
The chancellor confirmed that he would not change George Osborne’s plans to reduce Corporation Tax from the current rate of 20% to 19% (from 1/4/17) down to 17% (from 1/4/20). This is welcome news for all businesses in the UK as it shows that the Government’s plan to have the lowest tax rate in the G20 is still on the agenda.
Many small businesses have been using the Flat Rate Scheme (FRS) as a simplified way of accounting for their VAT liabilities each quarter.
Unfortunately from 1/4/17 a new VAT rate of 16.5% will be introduced for many labour only businesses who have limited costs (to be known as a “limited cost trader”) and we understand that this will supercede any existing rates which may have been used by existing VAT registered businesses.
The details have not yet been finalised but we believe that a trader whose VAT inclusive expenses on goods (not services) are < 2% of their VAT inclusive turnover or <£1,000 will fall into this category. Note that the expenses used in the calculation will also exclude: capital expenditure, food and drink consumed by the business and vehicle and fuel expenses.
This will affect many of our smaller VAT registered clients, so please ensure you contact us to discuss this further for your specific situation.
Making Tax Digital
This is the Government’s current plans to move all small businesses and Landlords to a quarterly reporting and filing regime and away from the current once a year filing.
Many bodies, including the ICAEW have contributed to the consultations which have taken place over the last few months to discuss what HMRC and the Government want from businesses and how they expect businesses to cope with the onerous requirements.
The Government intend to publish its response to these consultations in January 2017 and we shall of course update our clients as to what it will mean for you at that point.
More support for Research and Development (R&D) and finance for growing firms
The Government plan to provide a further £400m boost for venture capital funds.
They may also review the tax position of companies who undertake R&D in order to make the UK more competitive in this area.
Many companies may be eligible for R&D tax relief, and whilst this is not a speciality of Moore Accountancy, we have contacts we can pass you on to for further guidance, so please get in touch if you think you may benefit.
Letting agent fees
These have been banned which is a cash flow benefit for many renters as it will reduce any up-front costs required when taking out a tenancy.
For landlords however, agreements with agencies should be reviewed to see whether the costs will now be passed onto landlords instead. It will therefore be necessary for landlords who use agents to review their income and costs to ensure they are not disadvantaged significantly.
If you wish for a more thorough review then please read our newsletter update.
Please contact Sid at Moore Accountancy (firstname.lastname@example.org) if you think any of the above changes will affect you and we can arrange a call or meeting to discuss any tax implications.