I had to rewrite this article. I was all set with information that would be useful to the many self employed small businesses about the National Insurance changes in the budget and then it changed again. I’m not complaining. In fact I’m delighted. As someone who undertakes the vast majority of my film work on a self employed basis it was great news that my NI rate wouldn’t increase by 2%. However there were other changes in the Budget speech that are relevant and that could have a big impact on your business. I’m going to examine three of them.
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What The Budget Is Changing For Small Businesses?
As we now know National Insurance rates are not changing for the self employed. However, there are other changes for us all to consider. We need to be informed about the changes to business rates, the reduction in the tax free dividend and the Making Tax Digital scheme. So let’s look at each of these in Turn.
Budget Impact On Business Rates
As we all know the revaluation of properties for business rates is long overdue. It was postponed when the scheduled increase coincided with a general election. No government wants to raise taxes just before it goes to the polls. The result of that postponement was that those of us paying business rates now find ourselves on the receiving end of a revaluation with an extra two years of property value increases included. The jump in rates will, therefore, be much higher for us all than it would have been. HOWEVER there was some mitigation in the budget.
Companies who will loose their business rate relief will have increases capped to £50 per month. Pubs with a rateable value under £100,000 will a £1,000 discount on their rates. In addition councils will have access to a £300 million fund to offer rate relief to businesses. This will be on a purely discretionary basis. You can find information about the scheme here.
Tax Free Dividend Reduction
If you are a company owner who pays yourself with a dividend rather than a salary then you started receiving a tax allowance of £5,000 in April 2016. Very nice. But that has just been reduced. Perhaps reduced isn’t an adequate word here. It’s been cut by 60% to £2,000. For many large business owners this is no problem but for a small business owner this will have a big impact. The reduction comes into effect in the tax year 2018/19 so if you are effected now is the time to start planning. You can look at the changes more closely here.
Making Tax Digital
The Making Tax Digital initiative was announced on the Budget of 2015. the scheme aims to use digital tools to create more timely tax information for both the government and for small business. There are actual practical implications for all of us. Every individual and business will get its own on-line tax account. We will be able to view our payments and liabilities in one place. HMRC will be able to draw data from employers and other Government departments to create data within the accounts.
One of the burdens of the new system for business owners is the need to update the account every quarter rather than uploading a yearly tax return. I can see benefits to this with the self employed able to demonstrate their income at any time rather than having to wait until the end of a tax year to have proof via an SA302. I can also see that we will all have to spend more time filling in HMRC on-line forms. The change made in the 2017 budget was to postpone the scheme for small businesses operating under the VAT threshold. Instead of having to be compliant by 2018 the deadline is now 2019. You can read more about the scheme here.
Was The Budget Good For Business?
I’m not going to make any political points here about whether the budget was good or bad for small businesses. What I will say is that it was certainly dramatic with twists and turns along the way. I will also say that we all need to keep our eye on the changes that have come and what lies ahead. Brexit is a looming paradigm shift for all business. We can be certain that there is more change on the way.
