As a big slap in the face for small businesses, here’s our take on the important changes affecting you the most.
Further to HMRCs announcement on the new tax on dividends (see here), the tax free allowance will be reduced from £5,000 to £2,000 pa as from April 2018.
For a Director/Shareholder of a limited company, it’s important to get the correct split to ensure you’re most tax efficient and make the most of any unused allowances for your spouse/partner.
The rate of Class 4 National Insurance (on business profits) will increase from 9% to 10% as of April 2018 and then to 11% as from April 2019. Class 2 NI will be abolished.
UPDATE: Philip Hammond has now made a u-turn on this and scrapped the Class 4 NI Increase planned as outlined above.
Self Employed businesses with a turnover below the VAT Threshold will not have to do this for another year. The dates applicable to business are now set to be:
April 2018 for Self Employed/Landlords with turnover above the VAT Threshold
April 2019 for all other Self Employed/Landlords with turnover above £10k
April 2020 for Limited Companies.
It’s important for businesses to get systems in place for this, and those affected should be thinking of this now. We will be advising clients on this separately.