From understanding expenses to starting a limited company, our downloadable business guides can help you.
So that was Chancellor Philip Hammond’s first and last Autumn Statement. He promised no rabbits from hats, but he did surprise many with his announcement that the Government will be moving to only one budget a year – an Autumn Budget – which gives us all more time to prepare for changes ahead of the new financial year. So under the new regime, the Autumn Budget 2017 will set the scene for the 18/19 financial year.
Sadly this was to our eyes the only radical announcement from the whole Autumn Statement, which overall was a fairly disappointing affair especially given the rather painful measures that will hit small businesses.
We’ll delve into more detail and analysis in the coming days, but for now here’s the Crunch summary of the Autumn Statement 2016.
The growth forecast sits uncomfortably by being worse than previously predicted, but not as bad as many forecast. This may well be because Brexit is still not clear, so we’re in the calm before the storm / good times, depending on your perspective! The Office for Budget Responsibility forecast 2.1% growth for 2016, but 1.4% for 2017, then recovering to 2% by 2020. This was bracketed with lots of uncertainty and risks over inflation.
Given the lower than expected GDP, and a reduced tax take for this year, the Chancellor gave up on plans for a Government surplus by 2020, which had long been expected.
The Chancellor’s theme was very much innovation and productivity. He made clear his desire to improve the UK’s low productivity when compared to German, French, and American workers, with a £23bn investment fund over 5 years. This was to be used on a broad range of infrastructure and transport projects. A particular focus of the fund is to be digital infrastructure including:
All of which could be considered ‘mood music’ to ensure 100% broadband access prior to confirming the ambitious timetable for Making Tax Digital (MTD). We shall see, as all that was said on MTD was that the consultations will be responded to in January 2017.
Many headlines have already been devoted to the Chancellor’s announced plan to abolish letting agent fees for tenants. We suspect the costs will just be shunted into higher rents but we shall see.
Additionally, Insurance Premium Tax will rise from 10% to 12% from June 2017, which will hit pretty much everyone for personal and business costs as it applies to nearly all types of insurance premiums including general business, home insurance and so on.
Unfortunately there were quite a lot of changes which will be to the detriment of the small business and contractor community. We’ve summarised them here, with more detail to follow.
From April 2017, the Government is introducing a new 16.5% Flat Rate VAT scheme that many ‘labour-only’ businesses, such as contractors, will have to move to. This will reduce the benefit of Flat Rate VAT for many self-employed firms, but it will still be more cost-effective than not being in the scheme. Find out more about the new Flat Rate VAT changes in this post.
Despite much consternation and doubt about its feasibility and outcomes, this much debated scheme is going ahead. From April 2017 HMRC’s Public Sector IR35 proposals are proceeding, with the surprising removal of a 5% expenses allowance for contractors, which had been previously suggested to cover their costs of being a company. The plan is now called Off-Payroll Working, which threw many of us scanning the documents at first! We’ve written more about the new IR35 changes here.
The Government will respond to the consultations and confirm plans in January 2017.
There will be no changes to existing plans, which reduce corporation tax to 17% in 2020. In a welcome move, Government will be clamping down on abuse of interest and losses by corporate groups to avoid tax. The detail of these could affect some tech firms, but the principles are definitely on the right track.
A major theme continues from previous years as the personal income tax allowance rises to £11,500 in April 2017. It is promised to go up to £12,500 by 2020. The Chancellor said he intends for the allowance to then automatically go up by CPI inflation thereafter.
Employer National Insurance Contribution thresholds will change to match the Employee threshold from April 2017, meaning that a tax efficient company director’s salary for next tax year will be £157 per week or £8,164 a year. As previously announced, the Chancellor confirmed that Class 2 National Insurance Contributions will be abolished from April 2018.
Salary Sacrifice schemes are to be scaled back from April 2017, with certain exceptions– cycle to work, low emission vehicles, pensions, and childcare. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation, and school fees will be protected until April 2021.
A new Government Investment Bond to be launched through NS&I, with an interest rate of 2.2% and an investment limit of £3,000 to help savers struggling with low interest rates. The ISA saving limit is confirmed to rise from £15,000 to £20,000 in April 2017. Personal savings allowances remain unchanged.
Fuel duty has been frozen for another year – saving the average car driver £130 and van driver £350 a year. Company car bands are also being adjusted to increase incentives to choose lowest emitting cars.
That’s the top line from the Autumn Statement 2016. We’re very disappointed to see small businesses getting short shrift again. The Chancellor has, yet again, dodged the radical change our tax and welfare system needs, instead tinkering with rules to eke out income here and there. We’ll bring you further analysis as we delve deeper into the detail.
Over the last few months of 2017 and the whole of January, client managers are busy reminding people of upcoming deadlines and things they’ll need to do to make it easy for them to keep on top of their Self Assessments.