The good news is that there weren’t many tax changes announced in the Spring Budget 2017.
Increase in Class 4 NI. The main rate of Class 4 NI is to increase from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect from 6 April 2019. For a self-employed individual with £30,000 trading profits, this will increase the Class 4 NI bill for the 2019/20 tax year by about £430. The abolition of Class 2 NI from April 2018 will partially reduce this increased NI but only by just under £150 a year.
After the budget, The Chancellor Philip Hammond announced a U-turn on this and he stated that “I have decided not to proceed with the Class 4 NIC measures set out in the budget. There will be no increases in NICs rates in this Parliament. We will continue with the abolition of Class 2 NICs from April 2018”
Dividend allowance reduced. The Chancellor has dealt another blow to limited company director shareholders by cutting the tax-free dividend allowance from £5,000 to £2,000 with effect from 6 April 2018. This means that a director shareholder paying tax at the basic rate will pay an extra 7.5% tax on £3,000 of dividends – a £225 tax hike. It will be considerably more for higher rate taxpayers at 32.5% of £3,000 = £975. This is still better than paying 20% and 40% on earned income plus there is no NI still on dividends.
Making Tax Digital. One welcome measure for small businesses is that Making Tax Digital, which includes the production of quarterly accounts for the self-employed, is to be suspended by one year, i.e. until April 2019, for businesses with a turnover under the VAT threshold.
Business rates. The £300 million discretionary relief fund for local authorities to target those businesses most in need is a very welcome short-term measure – but this may not be big enough. Many small firms are already receiving their bills and so it is vital that Government and local councils communicate immediately with their local business population to explain how this fund will work. Businesses set to lose small business rate relief will be helped by the cap of £50 per month set on any increase. In addition, smaller, independent pubs will benefit the most from the proposed £1,000 reduction to their rates bill this year.