Autumn statement - 23 November 2016
Changes propsed to the flat rate scheme for VAT, affecting 'low cost' businesses;
Businesses who's expenditure on goods (not services) is less than 2% of their turnover will see their flat rate percentage change to 16.5%, which equates to repaying the government 19.8% of the 20% collected in VAT, making it no longer a worthwhile exercise for those who register voluntarily.
Also, the minimum wage is set to increase from £7.20 to £7.50 for 22 year olds and over, from April next year.
Insurance premium tax set to rise from 10% to 12% from April next year.
Other recent news
Dividend tax – From 6th April 2016 a new personal tax will apply to UK dividends received over £5,000. The rates will be 7.5% for basic rate taxpayers, 32.5% for higher rate, and 38.1% for the additional rate. For company owners, tax planning is key here, maybe that company car isn’t so expensive after all.
Landlords – this may be painful reading for some! Lots of changes happening here;
Changes coming to the way in which rental income is taxed, being implemented evenly over 4 years from April 2017, and will affect those who pay tax at the higher rate and have a mortgage outstanding on their rental property. More devil in the detail too, as the way in which the income is calculated will mean that more landlords are pushed into the higher rate tax band.
Stamp duty, although this has fallen for those buying a home, it has gone up considerably for landlords and for second homes. Previously, for a property costing £250,000, the stamp duty would have been £2,500, from April 2016 the amount for the same property will be £10,000!
Wear and tear allowance is no more from April 2016, from then on, only actual costs can be claimed against the income.
It’s not quite all bad news, the Rent a room relief has gone up from £4,250 to £7,500, but all in all, the above changes will be drastic for some, potentially wiping out any profits being made.
For anyone who is affected by the changes, there may be limited options but they should look at how they structure their income, and anyone thinking about becoming a landlord should have a good look at the figures and the options before making any decisions.
Employment Allowance – from April 2016 the allowance for Employers National Insurance contributions (Class 1) has risen from £2,000 to £3,000, a good saving for most employers. The allowance has however been removed from companies where the only employee is the director.
Marriage Allowance – If you or your spouse are not using all of their personal tax allowance, they may be able to transfer up to £1,100 of the allowance to their partner, potentially reducing their personal tax bill by £220. This is open to both employed and self employed people. If you do not need to complete a personal tax return, see here for details of how to claim.
15% Corporation tax rate – I may be a tad cynical but I tend not to believe what politicians say, especially on their way out. Having said that, it will be welcome news if it does go ahead. At present the rate is due to fall from 20% to 19% from April 2017.