Spring Budget 2017: The Takeaway for Freelancers and Small Business Owners

This year’s Spring Budget was delivered this afternoon by Chancellor Philip Hammond. The Budget wasn’t expected to be particularly flamboyant as the Chancellor already suggested in an interview with the BBC that there would be “no spending sprees” in order to keep “gas in the tank” for Brexit.

While there was no firework show, the Budget did announce changes to National Insurance Contributions (NICs) as well as changes to dividends that will affect both small businesses and the self-employed.

National Insurance Contributions

Class 4 NICs will rise from 9% to 10% from April 2018. From April 2019 they will rise another 1% to 11%. The aim of this is to close the tax gap between the self-employed and employees. Currently employees pay 12% in NICs, while the self-employed pay 9%.

This raise comes as the Chancellor believes the gap is no longer justified. In the Budget he said: “Historically the differences reflected different entitlements to the state pension, but with the introduction of the new state pension the difference has been substantially reduced”.

George Osborne’s abolition of Class 2 NICs will come into effect from April 2018.

On 15th March, Chancellor Philip Hammond announced in a letter to Conservative MPs: “There will be no increases in National Insurance rates in this Parliament.” As a result, the changes to Class 4 NICs described here will no longer be going ahead.

Dividend allowance

Tax-free dividend allowance will drop to £2,000 from the current £5,000. This will affect small business owners and shareholders who take their salary as a combination of salary and dividends.

This will be introduced from April 2018.

Corporation tax

Corporation tax will drop to 17% by 2020, from its current 20% which will be the lowest rate in the G20.

From April 2017 corporation tax will fall to 19%, and after this it will fall again to 17% in 2020.

Business rates

Business rates will rise to £33.7bn by 2021/22 from the current £28.8bn. This huge rise comes with a £435 Budget relief to help smaller businesses.

There will be a cap of £50 a month for small businesses on top of the current small business rate relief to provide extra help. 90% of pubs will also get a £1,000 discount on top of the small business rate relief.

Speaking to the BBC, Mike Cherry, chairman of the Federation of Small Businesses described this help as “a direct and much-needed response to those facing astronomical hikes in their business rates”.

Making Tax Digital

Businesses with a turnover under £83,000 (the VAT threshold) will have until April 2019 until MTD becomes mandatory, giving smaller businesses longer to prepare for the switchover.

This will be Chancellor Philip Hammond’s first and last Spring Budget as the Autumn Budget (previously Autumn Statement) will become the only annual Budget.

What are your thoughts on this year’s Budget? Leave your comments in the section below.

 

 

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