Spring Budget 2017 – What it means for small businesses and the self-employed

We’ve all heard about the release of Philip Hammond’s Spring Budget for this year, and many of us will have tuned in to listen to the news summary about it, but how many of us understood what the contents of the budget actually mean for small business owners and the self-employed?

We’ve broken the budget down and highlighted the areas that will affect you and your business the most.

Business Rates
The high business rates were highly criticised and so the government has taken the following steps in an attempt to take some of the pressure off from the rates of smaller businesses.

  1. A fund of £300 million will be offered as a discretionary relief to small businesses that are the worst affected by the rates.
  2. Any business that is losing their small business rate relief will see their bill increase by no more than £50 a month.
  3. All pubs with a rateable value of less than £100,000 will get a £1,000 discount on the rates they pay.

Savings

From April 2018 the total tax paid by an employed worker and by one that has set up their own company is set to change. The chancellor plans to do this by reducing the tax-free dividend allowance for directors/shareholders. It will be reduced from £5,000 to £2,000. 

Tax
The chancellor has taken measures to benefit those in employment by scrapping the NIC Class 2 and raising the Class 4 national insurance contributions from 9% to 10% by April 2018. They are then due to rise to 11% in April 2019, which will raise £145 million a year by 2021-22. A self-employed person with profits over £16,250 will have to pay more as a result of these changes.

Economy

The UK economy is forecast to grow by 2% and at a faster and higher rate than was previously predicted. Although, this isn’t set to last, with Hammond outlining that growth will then fall to 1.8 in 2018 and 1.7 in 2019. Inflation is forecasted to be 2.4% and then 2% up to 2019.

We asked PFC Director, Alun Rogers, to shed some light on how this new budget will affect SME’s and freelancers –

“There’s no doubt that Philip Hammond has opted for some controversial changes in this 2017 budget, particularly in relation to national insurance contributions and business tax. There is also no doubt that it is already tough out there for SME’s and freelancers, and these rises in contributions certainly won’t help anything. That’s why we do everything we can to assist small businesses and the self-employed to source a range of suitable finance options when they struggle with unpaid invoices and cashflow issues amongst other financial issues relating to business.”

If you want to discuss what finance options we have available and how we may be able to help you and your business, then please do not hesitate to contact us here at PFC.

Autumn Statement: What it means for individuals and businesses

The Chancellor of the Exchequer gave his Autumn Statement to Parliament on 23 November 2016, but what’s its impact on the UK’s economy and how does it affect the individual as well as UK businesses?

The UK economy is forecast to be the fastest growing major economy in 2016, but the Office for Budget Responsibility has forecast growth to slow and inflation to rise over the next two years.  Despite this; employment is set to rise continually over the next 5 years with half a million more people forecast to be in work by 2021.

For the individual

In 2017, fuel duty will remain frozen for the seventh successive year, saving drivers £130 a year on average.

To support savers, NS&I will offer a new three-year Investment Bond with an indicative rate of 2.2% from spring 2017. The bond will offer the flexibility to put away between £100 and £3,000 and be available to those aged 16 or over.

The Personal Allowance is the amount of income you can earn before you start paying income tax. It is currently £11,000, and will rise to £11,500 in 2017-18, and £12,500 by 2021. The point at which you pay the higher rate of income tax will increase from £43,000 this year, to £45,000 in 2017-18.  This is set to increase to £50,000 by 2021.

The National Living Wage for those aged 25 and over will increase in April 2017 from £7.20 per hour to £7.50 per hour. More will also be spent on clamping down on those who do not pay the national minimum wages.

For businesses

The main rate of corporation tax has already been cut from 28% in 2010 to 20%, and will be cut again to 17% by 2020, by far the lowest in the G20 and benefitting over 1 million businesses.

Rural rate relief will increase from 50 to 100% in April 2017, saving a business up to £2900 a year. This business rate relief is available to businesses in rural areas with a population under 3,000

A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. Tax avoiders are hit with significant bills when HMRC defeats their avoidance scheme, this new penalty will ensure that those who help them will also face the consequences.

From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income.  In salary sacrifice schemes, employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone). Both the employer and employee make a tax saving, because the benefit is taxed less than a salary or not taxed at all.

Insurance Premium Tax (IPT) will increase from 10% to 12%. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.

In summary the Autumn Statement appears to have been designed to get people back in work to stimulate the economy and growth.  How well it will work remains to be seen and depends upon many other factors.  To see how these changes can affect your business or for financial assistance, get in contact with a member of our team.