Spring is finally here, and with it comes this year’s Budget announcement.
As ever, there are pages and pages of tax reforms and budget cuts to sift through – some of interest, some most definitely not…
So to save you several tedious hours attempting to decipher the Treasury’s latest novel, we have put together a handy guide (read the full report here) to all the most important changes that appeared in this years Budget report.
The Economic Forecast
The Office for Budget Responsibility forecasts that the UK economy will grow by 2% in 2017
Making Tax Digital for Business
The Government has delayed the introduction of Making Tax Digital (MTD) for those unincorporated businesses and landlords with turnover below the VAT threshold. Compliance with MTD rules has been deferred by a year and is now due to start with effect from the first accounting period after 5 April 2019. Businesses & individuals with turnovers in excess of the VAT threshold (£85,000 from April 2017) will be required to comply from April 2018.
£2 Billion for adult social care over the next 3 years
In order to ease the pressure on the NHS Councils are to be provided with additional funding for social care to meet the growing numbers of elderly people.
The proposed change in National Insurance Contribution for the self-employed has been cancelled by the Chancellor for the time being
Personal Allowances and higher rate threshold
The personal allowance is rising by £500 to £11,500 and the higher rate threshold is increasing by £2,000 to £45,000.
National Living Wage
In April 2017 this will increase from £7.20 per hour to £7.50 for all working people aged 25 and over. For younger employees the rates as of April 2017 are as follows:
– 21 to 24 – £7.05
– 18 to 20 – £5.60
– Under 18 – £4.05
– Apprentice – £3.50
Micro-entrepreneurs allowance
As introduced by George Osborne last year, as from April 2017 individuals with property or trading income won’t need to declare or pay tax on the first £1,000 they earn from each source. Should they earn more than that they will need to declare it, but can still take advantage of the allowance.
Restricting finance cost relief for individual landlords
This measure will restrict the relief on residential properties for finance costs, such as mortgage interest or interest on loans to buy furnishings. It will be introduced gradually from April 2017 until the relief is provided at the basic rate of tax only, as follows:
– 2017 to 2018; deduction from property income restricted to 75% of finance costs with the remaining 25% being available as a basic rate tax reduction.
– 2018 to 2019; deduction of 50% finance costs, 50% available as a basic rate tax reduction
– 2019 to 2020; deduction of 25% finance costs, 75% available as a basic rate tax reduction
– 2020 to 2021; all financing costs to be given as a basic rate tax reduction
ISA Allowance
In order to assist savers at a time of unprecedentedly low interest rates. as at April 2017 the annual ISA allowance will increase from £15,240 to £20,000.
Tax-Free Childcare will soon be available to working Parents
– Tax-Free childcare will provide up to £2,000 a year in childcare support for each child under 12.
– Parents will be able to receive up to £4,000 for disabled children up to 17.
– Parents with younger children will be able to apply for the scheme first. All eligible parents, able to access the scheme by the end of the year
– Working parents in England will be able to apply for 15 hours of free childcare for 3&4 year olds up to a combined total of 30 hours a week.
Tax free dividend allowance will reduce from £5,000 to £2,000 from April 2018
This will reduce the tax difference between the self-employed and those working through a company.
Capital Gains Tax
Individuals’ CGT allowance to rise to £11,300 for 2017/18
Corporation Tax and business tax
The Government has reaffirmed its commitment to the business tax road-map:
– Financial year 2017 – 20%
– Financial year 2018 – 19%
VAT and indirect taxes
Registration and deregistration thresholds rise:
– The taxable turnover threshold for a person to be registered for VAT increases from £83,000 to £85,000.
– The taxable turnover threshold for a person to de-register from VAT increases from £81,000 to £83,000.
Flat Rate VAT scheme
From 1st April 2017, companies with a low cost base will be known as limited cost traders and will need to use a flat rate percentage on gross sales of 16.5%. A limited cost trader is defined as one that spends less than 2% of its sales on goods (not services) in an accounting period. There are exclusions to some purchases for example, capital goods & motor expenses. A firm will also be a Limited Cost Trader if it spends less than £1000 a year, even if this is more than 2% of the firm’s 2% turnover on goods. The test needs to be calculated each VAT quarter to establish the rate payable. There is an online calculator on HMRC website. https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period
Online VAT liability & collection
The Government is considering different ways of collecting VAT in order to address the problem of overseas businesses selling goods to UK customers online without paying VAT. The Government’s intention is to identify a mechanism to deduct input VAT at the point of purchase.
If you would like to find out more about how the recent budget announcements may effect you give us a call on 0113 385 4656 or drop us an email at hello@notjustnumbersltd.co.uk.