What does the Budget mean for business?

As Philip Hammond delivered his spring budget this afternoon, the business world held its breath.

Fingers were firmly crosses for policies that would help business owners better plan for the months and years ahead.

The self-employed wanted reassurances that they would be able to manage their financial affairs in the most tax efficient way.

But the Chancellor presented a mixed bag for employees and employers.


Big shifts

The most significant announcements were that the self-employed will pay more in Class 4 National Insurance contributions from April 2018 and the tax-free dividend allowance will fall by more than 50%.

With Class 4 NI contributions, the rate will rise by 1 percentage point to 10%. In April 2019 the rate will rise again, to 11%.

They will still pay less than employed workers, who pay Class 1 NI at 12% on earnings between £8,164 and £45,000 and who - like the self-employed - pay 2% on earnings above £45,000.

The changes to the tax-free dividend allowance will chiefly affect small business owners.

It will see the allowance fall dramatically from £5,000 to £2,000 a year from April 2018.

Mr Hammond argued that the greatest beneficiaries of the perk were either director-shareholders or wealthy savers with share portfolios worth more than £50,000.

The previous dividend allowance of £5,000 allowed investors to hold around £150,000 in share-based portfolios tax-free.

The cut in the allowance will reduce that figure to £60,000. 

It will cost basic-rate taxpayers £225, higher-rate taxpayers £975 and additional-rate taxpayers £1,143.

Mr Hammond also said Corporation Tax would fall to 17% by 2020.

The Chancellor said "the UK needs a fair tax system" so that the UK becomes the "best place to start a business".


Something for everyone

The key form of tax for almost everyone – from employees to the self-employed, pensioners and savers – is income tax. 

At the moment everyone pays tax on earned income above the current personal allowance of £11,000.

From April 6 this year the allowance will rise to £11,500.

Higher-rate tax is currently due on earnings of more than £43,000. But from April 6, this threshold will rise to £45,000.


A snapshot

To help you understand the implications of the Budget on you and your financial affairs, we have provided the highlights below:

Business tax

·      For business below VAT registration threshold, there will be a one-year delay to the introduction of quarterly reporting.

·      Corporation tax will fall to 17% by 2020.

Business rates

·      Three measures for England were introduced with the aim of helping small firms. These were:

-       Capping business rate rises at £50 a month for those leaving small business rate relief

-       - A £1,000 discount on pubs business rates bills if they fall below a ratable value of £100,000 (90% of pubs do)

-       A £300m discretionary relief fund to tackle issues in their local areas.


·      From April 2018, the Government will raise (Class 4) NIC payments for self-employed people from 9% to 11%.

Tax-free dividend allowance

·      The tax-free dividend allowance will be cut from £5,000 to £2,000 from April 2018.

Personal tax allowances

·      This will rise to £11,500 for basic-rate taxpayers.

National living wage

·      This will rises to £7.50 in April.


·      Previously announced new NS&I bond will be available from April and will pay 2.2% on deposits up to £3,000

If you want any help working out the cost implications of the Budget announcements on your financial affairs, give us a call today.