08 Mar Budget 2017 – Summary For Contractors and Small Business Owners
The Budget 2017 was the first announcement delivered by the Chancellor, Phillip Hammond. On the whole there were no real surprises, as expected. A few things though will affect contractors, freelancers and small business owners, both self-employed and operating through a limited company. Here we summarise.
Key points from the Budget 2017
Economic growth predictions
Over recent months, the news headlines have been gearing up for good news during the Budget regarding growth in the economy.
Today, the Chancellor delivered positive new forecasts for economic growth between now and 2021.
Since the EU Referendum, it was expected for the economy to tumble, although figures are showing that it wasn’t as bad as predicted.
However, any true repercussions from Brexit are yet to be felt, so the story remains “in progress”.
New predictions are as follows:
- 2017 – 2.0% (was 1.4%)
- 2018 – 1.6% (was 1.7%)
- 2019 – 1.7% (was 2.1%)
- 2020 – 1.9% (was 2.1%)
- 2021 – 2.0% (was 2.0%)
The predictions of a surplus by 2020 have been abandoned. New figures suggest progress between now and 2022 but Hammond has indicated that the surplus won’t be a reason to spend more or ease on austerity.
New predictions are as follows:
- 2017-2018 – £58.3 billion (was £59 billion)
- 2018-2019 – £40.8 billion (was £46.5 billion)
- 2019-2020 – £21.4 billion (was £22 billion)
- 2020-2021 – 20.6 billion (was £21 billion)
- 2021-2022 – 16.8 billion (was £17.2 billion)
A helping hand for some regarding Business Rates
After the recent news that Business rates were to rise, the Chancellor was expected to do something to counter the backlash.
He has come up with a three-fold approach to help ease the financial burden for some business owners.
- A promise to cap the rate rise for small businesses to a maximum of £50 per month
- A £1,000 discount to be available to pub owners, where the rateable value is under £100k. This will help out 90% of pubs.
- A fund of £300 million will be made available for local authorities to allocate to help local businesses.
Clamping down on tax avoidance
The initiative to clamp down on tax avoidance continues, and £820 million will be invested in tax-avoidance measures.
Primarily, a new penalty will be issued for accountants and tax advisers who create tax-schemes that are defeated by HMRC.
Also, measures will be enforced to stop businesses from being able to convert capital losses into trading losses.
VAT will also be charged on roaming telecoms outside the EU.
Clawing back tax from the self-employed through a rise in National Insurance
If you are trading as self-employed then you could be affected by the increase in National Insurance from 2018. This tax will rise by 1% in 2018 and a further 1% in 2019.
The Treasury expects to generate an additional £145 million from this increase, yet many will simply see this as a further assault on entrepreneurialism.
The Chancellor communicated that he is just trying to level the tax position between those that are employed and those that are self-employed.
However, realistically he is reacting the growing number of people choosing self-employment these days and working out how they can profit.
Reduction in the tax-free dividend allowance from 2018
Only last year, the dividend tax system was given a shake up and the new £5,000 tax-free dividend allowance was introduced.
From 2018, this will reduce to just £2,000 and appears to be another dig at shareholders that currently have a tax advantage from drawing money via dividends instead of a salary.
This will inevitably affect many contractors and small businesses operating from a limited company.
The personal tax allowance set at 11,500
As expected, the personal tax-free allowance will be £11,500.
Increased interest for savers
Due to drastically low interest rates on savings, the government were expected to take action to appease the situation, moderately.
A three-year bond will be available from April 2017, with an interest rate of 2.2% for savings balances of up to £3,000.
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