The Budget 2016 and what it means for your business
There’s no doubt that the major headline from the Budget 2016 is the dramatic resignation of Work and Pensions Secretary Iain Duncan Smith, in protest to the proposed cuts to disability benefit. In amongst all the commentary and controversy, it’s easy to forget the less publicised yet important Budget 2016 announcements that will impact small businesses.
Budget 2016 key measures
Here is a run-down of the key measures that will be of interest to entrepreneurs, freelancers and contractors:
Business rates are no longer to be a millstone around the necks of approximately 600,000 small businesses, thanks to a new permanent relief threshold of £15,000 rateable value (a huge increase from the current threshold of £6,000). The higher rate of tapered relief has also been significantly increased, from £18,000 this year to £51,000 from April 2017.
The move has largely been welcomed, as it provides a much-needed boost to independent retailers, but some critics say the measure does not go far enough. Jerry Schurder, head of business rates at property consultancy Gerald Eve, said: “A more creative Chancellor looking to radically simplify business rates would have taken all low-rateable-value properties – not only those occupied by small firms – out of the system entirely.”
Corporation tax is to be scaled back from 20% to 17%. This is a welcome surprise, in that the proposed reduction had been just 2%; however, the cut does not come into force until 2020. The forthcoming Finance Bill will lay out further details of the Government’s plans for corporation tax, including how the various reliefs will be structured.
Personal allowance thresholds are to be increased again from April 2017. The tax-free earnings threshold is to rise to £11,500, which is an improvement on the previously quoted figure of £11,200. Higher rate taxpayers will also benefit from the largest above-inflation cash increase to the 40% tax threshold since 1989. From April 2017, this will be increased to £45,000.
National Insurance contributions for the self-employed have been abolished, much to the delight of the many sole traders and contractors who currently have to pay them.
The Chancellor also gave a £1,000 tax break to online traders (such as eBay shops), while simultaneously promising to crack down on overseas traders who store products in the UK with the intention of selling them online without paying any VAT.
A £1,000 tax break is also to be made available to landlords who rent rooms in their properties through the sharing economy.
Gary Turner, chief executive of Xero, which is one of our preferred accounting platforms here at 3 Wise Bears, called the Budget 2016 “one of the most significant… for small and medium-sized businesses we have seen.”
