We don't usually put our monthly email on the blog, since it's a client care thing to us rather than a marketing thing. But from time to time we like to give a flavour of it to people we don't work with, so here's the summary of the Budget that we sent out to clients and contacts yesterday.
It was Budget day yesterday.
In 2010 the government set up the Office of Tax Simplification. It must be the most ineffectual governmental agency of all time, since yet again in this Budget tax got more complicated still. As we wrote in a blog the other day, we’re in a bizarre period where the government is obsessed with making it easier for businesses to submit tax returns, but virtually impossible for them to work out what should go on them. Anyway, here are the aspects of yesterday’s Budget that we think will be of most interest/use to you.
The biggest news might be the new sugar tax - but we don't think it's massively relevant to our clients' businesses!
A good budget for small businesses?
That seemed to be the general verdict afterwards. It’s clever stuff by old George, because he got the bad stuff for small businesses (like tax on dividends) done in the Autumn Statement a few months ago, and that’s forgotten about by the time the proper Budget comes around. Overall there was more good than bad, but a few high-profile bits weren’t as good as they sounded on the face of it.
Lifetime ISAs
This was a classic headline-grabbing announcement that when you think about it, isn’t all that amazing – the ideal thing for a Budget, basically.
The idea sounds innovative – an ISA that can only be taken out by someone under 40 (but continued once they’re over 40), that the government will top up by a pound for every four pounds you contribute (you can put in up to £4,000 in a year, they’ll add up to £1,000), as long as the money is used for a first-time house or flat purchase, or saved until you retire. Pretty good, right?
But, if you think about it, there’s already a system whereby the government will top up your investment by (at least) a pound for every four pounds you contribute, as long as you save the money until retirement. It’s called a personal pension. So the innovation here is purely that you can get at a bit of your retirement provision early, as long as you use it for your first property purchase. Nice, but not revolutionary. Plus, you can actually get retirement funds out of a traditional pension at a younger age, and often get a higher rate of government contribution. So this Lifetime ISA not necessarily as brilliant as they'd like you to think.
Pensions
Stayed the same, after all the fuss in the papers over the last few weeks.
Tax Bands
Nothing of interest to report. Going up a bit, as you’d expect.
Contracting to the public sector
This is very relevant to a number of you. The public sector uses a lot of freelancers/contractors invoicing via their own limited companies. The Chancellor announced widely-anticipated moves to ensure that those people don’t save tax or NICs by doing so. From 2017 (not this year, next year), the public sector body will be responsible for the calculation and payment of the freelancer’s tax and NIC on the contract, apparently.
It’s utterly absurd really, because if the government are so concerned about government workers paying the same tax and NIC as they would do if employed via PAYE, then THEY COULD JUST EMPLOY THEM VIA PAYE. It’s hardly rocket science. There’s no need to layer on new tax laws, just change your own procurement rules – you’re at fault here, not the freelancers. Anyway, it’s happening.
Capital Gains Tax
A bit of a rabbit out of the hat - but it's not remotely the tax cut it appears. Capital Gains Tax is currently 28% for higher-rate taxpayers, and it’s going down to 20% from April. For basic-rate taxpayers it’s going down from 18% to 10%.
The thing is, at present, most people selling a business only pay 10% anyway, because they can claim something called Entrepreneur’s Relief. So no change for them. And for another large chunk of CGT-payers - those selling rental properties or second homes - it's staying at 18%/28%. So it might just be a rather small proportion of those paying CGT who will save anything here. Clever work, George.
Insurance Premium Tax
Another clever thing. IPT is going up by 0.5%. So your insurance will get a little bit more expensive, but you'll blame the insurance company. It's a great tax to increase if you're a Chancellor.
New £1,000 tax allowances
There was not much detail on a couple of new tax-free allowances, of £1,000 each, below which you don’t need to tell HMRC about the income. If we describe them as the “side business/eBay trading allowance” and the “Airbnb allowance” then that probably sums them up. Since one suspects that not that many people were telling HMRC about income at that level anyway, this is more admin than anything else.
Corporation tax going down (eventually)
A further reduction in corporation tax in a few years' time – to 17% - was announced. This was just continuing a general trajectory of decreasing rates starting in 2017, so it’s probably what we’d have guessed would be happening anyway.
There was bad news for trainee accountants still to do their tax exams, as a tranche of measures was announced designed to restrict the way very big companies can save tax on losses or on interest payments to overseas associates. But they’re for companies far larger than those reading this email, happily.
Abolition of Class 2 National Insurance for the self-employed – don’t get too excited
Self-employed people pay two types of NIC, one very small (Class 2), one generally much bigger (Class 4). The very small type is going, which was widely known already. Don’t be surprised when the big one goes up a bit to compensate!
Small Business Rates Relief
At present, only businesses with premises with a rateable value (basically a theoretical annual rent that appears on your Business Rates bill) of less than £6,000 qualify for a discount on their Business Rates. This is going up, and premises with a rateable value of up to £15,000 will qualify (to get a picture of what kind of premises that covers, imagine somewhere just marginally smaller than our office. Gah!).
Stamp Duty on Commercial Property
Just as Stamp Duty on residential property changed from a "slab" system to a "stepped" system a year or two ago (which was good and sensible), now Commercial Property Stamp Duty is changing similarly. As with the first change, Stamp Duty on 90% of transactions will stay the same or go down, with just the most expensive 10% going up. There are transitional rules if you're in the middle of a purchase.
If anything else came up in the Budget that you weren't clear on or think could be of use to you, do call or email - we'll be pleased to talk about it. Similarly, if you'd like to talk about any of the topics above, let us know - though bear in mind that the nature of these things is that often the detail won't yet be finalised/published/understood.
Comments