As a startup founder, SME owner or aspiring entrepreneur, we realise that there can often be a massive disconnect between the decisions made at No10 and the impacts on your business.
With Article 50 due to be triggered any day now, at YENA we know that now, more than ever, it is important to understand and be aware of what the impact of certain government decisions are.
Therefore, in the name of transparency, here’s a breakdown of last weeks Budget.
What you should know:
1. Small Business Rate Relief
What is it?
It is the discount that some businesses are entitled to by their local councils, based on the rateable value of the property that they own. It was announced in the budget last August that, as of April 2017, there would be another revaluation of the rateable value of properties across the UK, the last of which was carried out in 2010 (based on prices in 2008), therefore affecting business rates.
What was announced?
To mitigate the impact of potential increases in business rates coming in April, a cap of £50 per month has been put on the amount your business rates can go up by.
Why are small business owners concerned?
The last property valuation was carried out in the midst of the financial crisis when property values were generally lower across the country. Though the announcements in last weeks budget will hopefully help to ease the burden, the sudden change still threatens to unbalance the finances of small businesses in the UK.
2. Tax-Free Allowance on Dividends
What is it?
Many small business owners choose to pay themselves through dividends, based on company profit, rather than through a set salary. In April last year, a tax-free allowance of £5,000 was introduced to help support self-employed workers.
What was announced?
As of April 2018, the tax-free allowance on dividends will be more than halved from £5,000 to £2,000.
What is the concern?
This adjustment is based on the so-called ‘unfair discrepancy’ between taxes paid by employed workers compared to self-employed ones. Many business owners feel that this is a direct penalisation on taking the risk of setting up your own business.
3. Digitisation of Tax Returns
What is it?
It was announced in the Summer 2015 Budget that tax returns for businesses below the VAT registration threshold (£83,000) would be moved completely online and delivered directly through HMRC (i.e. no more self-assessment) as of April 2018, along with quarterly reporting requirements.
What was announced?
In last weeks Budget it was announced that the digitisation of tax returns would be delayed a year until 2019.
What is the concern?
Many small business owners and accountants alike breathed a small sigh of relief in light of this announcement, but concerns still remain over the administrative burden on the government and it’s ability to cope with such a radical transformation.
A silver lining?
As of lunchtime today the government scrapped it’s plan to increase the National Insurance Contributions (NICs) of self-employed workers.
This part of the Budget undoubtedly caused the biggest uproar last week.
What are NICs?
NICs are taxes paid that allow you to qualify for certain benefits, including the state pension.
What was announced?
Originally it was announced that there would be an increase in NICs for self-employed workers of 1% in 2018, from 9% to 10%, and a further 1% in 2019, from 10% to 11%, to account for the ‘unfair discrepancy’ between NICs for employed and self-employed workers. Plans to abolish Class 2 NICs in April 2018 are still going ahead, with Class 4 contributions being reformed to introduce a ‘benefit test’ for all self-employed workers below the current £8,060 threshold.
What was the concern?
Most of the concern was directed at the fact that many small businesses owners feel justified in paying lower NICs due to the risks they shoulder (i.e. no holiday or sick pay). This government U-turn comes as the Chancellor faced backlash both from backbenchers of his own party, who said that the move went against the pledges made in the Conservative General Election Manifesto in 2015, as well as the nearly 5 million self-employed people across the UK.
And that’s that… for the time being. The next budget will occur in August this year, but with the reality of Brexit coming closer and closer, we’ll be keeping you up-to-date with everything you should know in the meantime.
