The March 2017 Budget was largely as expected, apart from Chancellor Phillip Hammond’s announcement that National Insurance Contributions (NICs) would increase for self-employed workers. But within a week of the budget statement this notion of an extra NIC burden on the self-employed was withdrawn. Significant changes which will go ahead include the dividend allowance being cut to less than half its current level and confirmation that the rate of corporation tax will be cut to 17% in April 2020. Read on to discover how the budget might impact your business. For further details and accountancy support email firstname.lastname@example.org or call +44(0)1438 869 644.
Government U-turn on self-employed burden
The Chancellor announced that National Insurance Contributions (NICs) paid by the self-employed would be levelled out towards the rate paid by the employed. The plan was to increase Class 4 NIC for self-employed people from 9% to 10% starting on the 6 April 2018 and then to 11% from 6 April 2019, bringing it closer to 12% Class 1 NIC employee rate. Flat rate Class 2 NIC contributions which are currently £2.80 a week, would then stop on 5 April 2018
Following criticism that the Government was wrongly targeting the self-employed and had reneged upon its manifesto commitments, a subsequent announcement stated that Class 4 NIC changes would be delayed until the autumn budget and a review undertaken to look at the relative benefits the self-employed are eligible for, compared to employees. Then one week after the original March budget statement, Chancellor Hammond announced a Government U-turn. It has decided not to go ahead with the Class 4 NIC measures set out in the budget. It will continue with Class 2 NIC from April 2018.
That’s good news for the self-employed but it means that the March budget isn’t balanced and the Government will need to plug a £2bn gap in the Autumn 2017 budget. Watch out for myriad niche (but less controversial) taxes to cover the shortfall.
Dividend allowance reduced
The Chancellor announced that the tax-free allowance on dividends will be reduced.
This allowance is currently £5,000 and only came into effect in April 2016. Now it will be cut to £2,000 with effect from 6 April 2018. The move is designed to recoup an estimated £6bn in lost taxes due to owner-managed businesses becoming limited companies to take advantage of this concession. This step will affect individuals who work through limited companies and take out profits as dividends, as well as people who receive a dividend income of over £2,000.
Corporation tax cut
As previously announced the rate of corporation tax rate will be reduced to 19% from 1 April 2017 and then to 17% from 1 April 2020. This change reflects the Government’s commitment to having the lowest rate of corporation tax of all the G20 countries
In Northern Ireland, the rate paid by small and medium sized enterprises will be reduced to enable them to compete with businesses in the Republic of Ireland where the current rate of corporation tax is 12.5%.
Business rates relief
The long-dreaded increase in business rates, due to a reassessment of property values will be softened by several transition measures. Currently 600,000 small businesses get small business rates relief. For any small business coming out of the rate relief scheme, the Chancellor has announced that there will be a cap on the amount of business rates paid, so that no small business pays more than £600 extra in business rates than they did in 2016-17. In addition, pubs can claim a £1,000 discount on their business rates for one year, where their rateable value is up to £100,000, with around 90% of pubs falling into this category. In a final measure to soften the implementation of new rateable values, local authorities will be given a £300,000 million fund which they can use to address cases of hardship, by providing discretionary relief.
Digital reporting deferred for some
Plans for ‘Making Tax Digital for Business’ are well-known and designed to shift reporting online and cut errors by 10%. Non-incorporated businesses and landlords need to start filing data with HMRC on a quarterly basis from April 2018. However, whilst the arguments for digitalising reporting are widely understood, the timescales for making the transition from paper to online have been criticised. Now the Chancellor has announced that businesses with turnover below the VAT threshold, currently £83,000, will be subject to a one-year deferral to April 2019.
Small business cash accounting threshold increased
Currently small businesses can choose the option of cash based accounting where turnover is up to £83,000. The Chancellor announced that from 6 April 2017 this threshold increases to £150,000 turnover, giving more small businesses this choice.
The Government website Gov.uk, explains the measure: “If you run a small business, cash basis accounting may suit you better than traditional accounting. This is because you only need to declare money when it comes in and out of your business. At the end of the tax year, you won’t have to pay Income Tax on money you didn’t receive in your accounting period.” This option no longer applies if turnover goes up above £300,000 in the tax year, in which case traditional accounting methods apply.
Allowances, income tax, and capital gains
The personal tax allowance is to be increased from the current level of £11,000 in 2016-17 up to £11,500 from 6 April 2017. This is the amount that can be earnt before tax.
The basic rate tax band goes up from £32,000 in 2016-17 to £33,500 in 2017-18 and the threshold for the higher rate of tax is set at £45,000. The Government is on track to achieve its stated aim of increasing the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament.
Also from 2017-18, the capital gains tax annual exemption will increase £11,100 to £11,300.
New rate set for National Living Wage
Currently the National Living Wage is set at £7.20 per hour. In line with the Government’s plans announced in the Autumn 2016 budget, the Chancellor has confirmed the new National Living Wage pay rate of £7.50 per hour from 1 April 2017. It’s a legal requirement for employers pay this rate to workers aged 25 and over. Employers with staff aged under 25 years must pay at least the National Minimum Wage which also goes up from 1 April 2017.
|New rate from 1 April 2017
Full broadband gets closer
The Government is set to invest £200 million to test ways to accelerate access to full-fibre broadband network. Proposals include aggregating the demand of public sector organisations in a locality to offset the investment risk, directly connecting to public buildings like schools thereby bringing full broadband closer to nearby businesses, and opening up public assets such as ducts to enable more cost-effective expansion of the network.
This proposal is in addition to the £1.7bn Broadband Delivery UK programme which intends to enable 95% of premises to access superfast broadband by the end of 2017. Current coverage is estimated at 92%.
Economic forecast better for 2017
Government forecasts for economic growth remain the same up to 2021. However, the forecasts have been revised so that growth is more robust in 2017 and dips from 2018-2020.
This year the forecast for GDP growth from the Office of Budget Responsibility is up to 2%, which is up from 1.8% in 2016 and the previous forecast for the period of 1.4%. Then from 2018-2020 the new forecast predicts lower growth than before of 1.6% in 2018 (was 1.7%), then 1.7% in 2019 (was 2.1%) and 1.9% in 2020 (was 2.1%). Grown is predicted to rise back to 2% (as previously forecast) in 2021.
If you’d like help with accountancy and tax planning for your business, please email email@example.com or call +44(0)1438 869 644.
Against a backdrop of slower forecast growth and rising inflation, businesses can take comfort from the fact that the Chancellor still forecasts that the UK economy will have the fastest growth rate amongst major economies. Positive growth and rising employment are forecast for the next five years. However, the Government’s previously stated aim of achieving a budget surplus by 2019 has been diluted. It now aims to continue reducing the surplus until 2020 and balancing the budget as soon as possible after that. Key measures which will impact business and personal finances are summarised here to help you assess the impact for yourself and your firm:
Lower Corporation Tax on the horizon
Currently set at 20% corporation tax will be cut to 17% by 2020. The Gov.uk website reports that this is “by far the lowest in the G20 and benefitting over 1 million businesses”.
Investment for productivity
A new £23 billion fund, the National Productivity Investment Fund, will help to boost productivity investing in: transport infrastructure, housing, digital communications, and research and development. This includes £27 million for a new expressway linking Cambridge and Oxford.
Funds for housing infrastructure
A new Housing Infrastructure Fund makes £2.3 billion available for housing infrastructure projects such as roads, to support the building of 100,000 new homes where there is greatest demand. A further £1.4 billion is to be used for 40,000 new affordable homes, with £1.7 billion to accelerate house-building on public sector land.
More R&D funds
There will be £2 billion extra per year for investment in research and development by universities and businesses by 2020-21, such as artificial intelligence, industrial biotech and robotic.
Fast fibre-optic broadband roll-out
£1 billion will be available for private sector investment into the roll-out of full-fibre broadband by 2020-21, as well as for trialling 5G networks.
SME growth fund
Small businesses have long been recognised by Government as driving innovation and growth. In this budget, £400 million has been earmarked for investment in innovative small businesses with growth potential, aiding up to £1 billion in new investment.
Investment in future transport options
£390 million investment in future transport technology has been outlined, to include driverless cars and renewable fuels.
Support for the very rural businesses
Rural rate relief goes up from 50% to 100% in April 2017. This tax benefit is designed to support rural businesses operating where less than 3,000 live and applies to businesses which are the only village shop/post office or the only pub/petrol station with a rateable value of up to £8,500 or £12,500 respectively.
Higher tax on products for insurers
From 1 June 2017, the rate of Insurance Premium Tax charged to insurance companies will go up from 10% to 12%.
No more letting agent fees
The Government intends to ban letting agent fees, payable by tenants, which cover activities such as drawing up tenancy agreements and checking tenant status. Consultation is due to begin imminently. These fees cost renters an average of £223 per rental.
Minimum hourly pay rates for 25 year olds
The National Living Wage for those aged 25 goes up from £7.20 per hour to £7.50 per hour from April 2017. A full-time worker on the National Minimum Wage will see their pay increase by £1,400 per year.
Minimum hourly pay rates for under 25s
The National Minimum Wage for those younger than 25 goes up too from April 2017:
- Age 16 -17 from £4.00 per hour to £4.05
- Age 18 – 20 from £5.55 per hour to £5.60
- Age 21 – 24 from £6.95 per hour to £7.05
- Apprentices from £3.40 per hour to £3.50
Increase in untaxed earnings
The amount you can earn before tax will rise from its current level of £11,000 to a Personal Allowance of £11,500 in 2017-18. The threshold for paying the higher rate tax will go up from its current level of £43,000 to £45,000 by 2017-18.
Tax advantages of some salary schemes removed
Certain salary sacrifice schemes, will no longer get preferential tax treatment, such a mobile phone provided as a benefit in kind. Instead they’ll be taxed as if they were a cash income. Current schemes in place before April 2017 can remain the same for up to a year, and for up to four years if they relate to cars, accommodation and school fees. Some schemes will be exempt from this change, they are: pensions, pensions advice, Cycle to Work scheme, ultra-low emission cars and childcare.
New savings bond with guaranteed interest rate
For savers, a new 3-year NS&I Investment Bond will be available from spring 2017, expected to offer a rate of return of 2.2%.
No change on fuel duty
This tax remains frozen for the seventh year in a row, saving individual motorists an estimated £130 a year on average.
Your next steps
For financial management help, including tax advice please contact Tarrant Green & Company. You can email firstname.lastname@example.org or call +44(0)1438 869 644.
As an employer, you can get up to £2,000 a year off your National Insurance bill with the Employment Allowance. This allowance has been available since April 2014 and targets support at small business. It was designed to offset the costs of National Insurance Contributions when employing four full-time staff on the National Minimum Wage.
Businesses have been able to use this allowance to cut the National Insurance Contributions they pay on employee’s wages by up to £2,000.
From April 2016 Employment Allowance will be £3,000
In this summer’s budget, the Chancellor, George Osborne, announced that the Employment Allowance will rise to £3,000 from April 2016. This is to offset the additional costs that small businesses will incur when the National Living Wage is introduced. In effect, a business will be able to employ four full-time staff on the National Living Wage without incurring any employer’s National Insurance Contributions.
Caution: If director is the only employee, no more allowance
There are some exclusions. The allowance will be withdrawn from companies where the director is the only employee. The reason for this is because the Employment Allowance is meant to support recruitment, rather than to help people offset their current tax liabilities.
90,000 businesses to enjoy zero National Insurance Contributions
The new National Living Wage of £7.20 per hour will be compulsory for workers aged 25 from April 2016 and the government plans to increase the rate to reach £9 per hour by 2020.
By providing the new £3,000 Employment Allowance limit, it’s calculated by the Treasury that up to 90,000 employers will benefit with their employer National Insurance Contributions liability reduced to zero.
For accountancy support email email@example.com or call +44(0)1438 869 644.
As Chartered Accountants who work with start-ups, it’s encouraging to note that our local region, the Home Counties, is ahead of the curve when it comes to new business creation. Analysis released in November 2015 by UHY Hacker Young reveals that two thirds of the top 20 net growth areas in the UK are located in the Home Counties. So if you’re thinking of starting a business here you’ll be in good company.
Setting up a business anywhere, at any time, requires a rare combination of a great idea, resilience, finance and entrepreneurship. Businesses that set up in areas with lower growth rates and go against the trends are to be applauded. Clearly the Home Counties has a more conducive climate for the new entrepreneur.
Not only is the Home Counties a hub for growth, but within this region, our Hertfordshire base is counted amongst the top start-up zones too. Watford, East Hertfordshire, Borehamwood and Potters Bar, Broxbourne and Waltham Cross are all amongst the UK’s highest for net new businesses. Unsurprisingly, London, another area where we support many clients, takes a top spot too.
UK net new business
Areas with the greatest increase last year
||Net new business
per 10,000 population
|Windsor and Maidenhead
|Horsham, West Sussex
|Borehamwood & Potters Bar
|Broxbourne & Waltham Cross
|Amersham & Chesham
|UHY Hacker Young statistics:
Number of net new businesses per 10,000
to year end 31 December 2013, latest figures available.
Tarrant Green & Company is well placed to support start-ups, with twenty years spent doing just that. Over the years we’ve provided advice to many new businesses on their structure, taxation and raising finance. We provide advice and training on accounts and admin systems, giving a practical perspective that saves time and money.
For advice, please email firstname.lastname@example.org or call +44(0)1438 869 644.
New research by AAT this year has revealed that it costs businesses £10bn to comply with the UK tax regime. But small and medium businesses shoulder the greater part of the burden. The AAT survey of 500 businesses, uncovered that SMEs spend around £9.9bn each year on tax compliance compared to £100m paid by larger firms.
When it comes to your own business we offer taxation advice and practical, cost-effective help. Just call 01438 869 644 or email email@example.com
Small and medium enterprise tax compliance
Whilst SMEs may (by definition) have up to 250,000 staff, the average number of employees is actually just up to four people. Despite this micro scale SMEs pay a disproportionately high amount to comply with the tax regime and this work also takes proportionately longer compared to big businesses.
- average 4 staff
- £4,376 on average in tax compliance costs
- 2 hours per week spent on tax compliance
Large businesses tax compliance
Although they employ over 250,000 people and often a great many more, the compliance costs for large businesses are proportionately lower.
- 250,000+ staff
- £8,900 on average in tax compliance costs
- 6 hours per week spent on tax compliance
Tax is too complex and time-consuming
SMEs believe that the tax system is overly complex.
- 70% say far too much time is needed to handle tax issues.
- 70% think that the UK tax system is too complicated.
The areas of tax which AAT members believe are most in need of simplification to help UK businesses are:
- Tax relief
- Capital gains
- Corporation tax
- Income tax.
Ease the compliance burden
Chartered Accountants Tarrant Green & Company can advise on a host of tax issues and help clients to comply with their tax obligations, shouldering some of the tax compliance burden. This includes:
- Advice on tax planning for individuals, partnerships and limited companies
- Preparation & filing of Personal Tax Returns
- Preparation and filing of Company Tax Returns
If you’d like any help then do get in touch on 01438 869 644 or email firstname.lastname@example.org
When you buy tangible assets for your business like premises and products you know exactly what you’re getting. But when it comes to something intangible, such as really good financial guidance for your business, it’s not quite so easy. Did you know that anyone can set up as an accountant without necessarily getting qualified first?
Effective advice on your finance and tax affairs can give your business an advantage in the market place. So what should you look for, and what does Tarrant Green provide?
A licence to practice
Find out whether your accountant is a member of a professional body such as The Institute of Chartered Accountants in England and Wales (ICAEW). This way you’ll know that they’ve completed several years of in-depth training, and probably much more, plus they have practical experience. Members are committed to continued professional development to ensure their knowledge remains up-to-date. ICAEW Chartered Accountants are bound by a code of ethics and if they offer professional services to the public, they’ll hold a practising certificate and professional indemnity insurance
Senior partner, Tarrant Green, is a Chartered Accountant and Member of the ICAEW, as well as other professional bodies.
Start-up advice and raising finance
If you’re starting up a new venture, or expanding an existing one, there are many sources of finance available and each have their pros and cons. Make sure your potential accountant can give you an objective assessment of your options – from sale and lease back and peer to peer lending, to grants, factoring and even employee shareholding (such as the John Lewis model).
At Tarrant Green & Company we support emerging new businesses through the ICAEW Business Advice Service – your first meeting is free.
Tax returns under control
Legally, personal and company tax returns must be filed. A good accountant will make this information-gathering and form-filling exercise as pain-free as possible. So find out how your accountant will approach this. Do they handle everything at an accountant’s rate at the year end, or do they help you to put book-keeping support in place to keep your costs low. And when you provide all the required information, will they prepare the return in good time so you know what tax you owe, or will you have to keep chasing until you finally find out your tax liability and submit your return close to the deadline. It’s worth asking, as it happens all too often.
Completing tax returns becomes cost-effective and trouble-free with Tarrant Green & Company.
Accounting and taxation can be very complex indeed. But with the help of someone suitably qualified, this knowledge will be used to provide you with straightforward guidance. Check that your prospective accountant has expertise to provide the type of tax advice you need.
Tarrant Green represents clients in HMRC tribunals due to extensive tax know-how.
Find out what experience your prospective accountant has of different accounting systems. Whilst there are many different systems, Sage is a big player. An accountant with expertise not just of Sage but of other systems besides is likely to be able to dovetail their service more effectively.
Tarrant Green has experience of these accounting and admin systems: Sage™; VT Accounts; KashFlow; Intuit Quickbooks; Opsis; Thomson Reuters Elite™ (Legal); Quill Pinpoint (Legal); Eclipse® Proclaim Case Management; Taxcalc®.
Practical commercial experience
Ask questions to establish how well your potential accountant can apply knowledge to provide practical answers. Give them a scenario where you took tax advice in the past and see if they come up with the same solution – or an even better one.
Our senior partner, Tarrant Green, knows finance, and he’s also provided Interim Management on request, with experience spanning over 20 years.
Availability of your accountant
Often businesses complain that they choose an accountant and then can’t get hold of them when they need support. Calls may be passed down the line to a junior, who is not able to handle the query successfully. So find out in advance how your accountant will support you and your business.
Once appointed, Tarrant Green is your Chartered Accountant; he’s pro-active and responds quickly – in person.