Today saw the unveiling of Hammond’s first - and last* - Spring Budget Statement, bringing with it as always tax changes, legislative tweaks and some good and some not-so-good implications. The Budget, similar to measures announced in last year’s Autumn Statement, was in many ways neutral for the small business sector.
Here’s a brief run-down of some of the most important announcements:
Small business tax
1. Business rates relief
The Chancellor first asserted that he couldn’t do away with business rates altogether as they bring in £25 billion a year to the Treasury.
He did say that he wanted it to be fairer and so the government will set out its preferred approach before the next revaluation.
However, he announced three measures for the new tax year:
- Any business losing small business rate relief will benefit from an extra cap - meaning their rates will not increase by more than £50 a month.
- Good news for 90% of the pubs across the country: from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.
- A £300m fund will be made available to councils to allow them to provide discretional relief.
Mr Hammond said, "Taken together, this is a further £435m cut [...] targeted at those small businesses facing the biggest increases, protecting our pubs and giving local authorities the resources to respond flexibly to local circumstances.”
2. Corporation tax cuts – still going to 17% by 2020
As announced in previous budgets, corporation tax will reduce to 19% from April 2017. The Chancellor reiterated that it will continue to decrease to 17% by 2020, 'sending the clearest possible signal Britain is open for business'.
3. Extra year for SMEs and landlords to prepare for MTD
Unincorporated businesses with an annual turnover below VAT registration threshold, will have until April 2019 to prepare before MTD becomes mandatory. Under MTD, business will have to use digital software to keep records and update HMRC.
1. Personal Allowance raised as well as the higher rate tax threshold
Currently, everyone pays tax on earned income above the current "personal allowance" of £11,000. From April 2017, the Personal Allowance will rise to £11,500. This will help 29 million taxpayers, including pensioners, giving most of them a lower tax bill.
The higher-rate tax threshold, 40%, which is currently due on earnings of more than £43,000, will increase to £45,000 from April 2017. The governments expects this to remove over 400,000 people entirely out of tax as a result of the changes. The threshold is expected to rise further to £50,000 by 2020.
2. Dividend tax
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. Mr Hammond’s argument was that the perk only benefits director-shareholders or wealthy savers with share portfolios of more than £50,000.
3. National Insurance changes for the self-employed
The abolition of Class 2 contributions will not be reversed. However, the self-employed will pay more Class 4 NI contributions. Starting 2018, the rate will rise by 1 percentage point to 10% and to 11% in April 2019.
4. National Living Wage
The national living wage will rise to £7.50 in April.
What was not mentioned?
Noticeably, updates around the IR35 legislation that many contractors and recruitment agencies were expecting to hear were not expressed. It looks like off payroll IR35 legislation will start on 6 April, but we can’t confirm till we’ve seen the final Finance Bill (anticipated 20 March).
The official documents
You can get the entire Spring Budget 2017 document on Gov.uk.
That was the summary from the 2017 Budget. We will continue to bring you further analysis as we delve deeper into the detail. Subscribe to you newsletter to be the first to know.
* Mr Hammond announced in November that he is abolishing the Autumn Statement and moving the main Budget statement from the spring to the autumn.