Small business owners will probably find that yesterday’s budget was not as bad as some of the headlines are making out. Yes national insurance will increase for the self-employed and company shareholders will again see an increase in their personal tax bills but a quick look at the numbers shows that, for now, these increases are likely to be modest.
Mr Hammond suggested that the self-employed earning below £16,250 will actually end up paying less National Insurance – and this seems about right. In fact even if profits were around the £25,000 mark then the increase (which will start from April 2018) will be only around £140.
As for small company owners that pay themselves using a mix of salary and dividends (for the best 2017/18 salary and dividend mix see here) the announcement means a basic rate taxpayer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.
On The Bright Side
Very welcome was the postponement to Making Tax Digital for the self-employed which for those under the VAT threshold means that quarterly reporting will not now become mandatory until April 2018 (starting April 2020 for limited companies).
And any firm coming out of Small Business Rate Relief will receive an additional cap next year on increases of no more than £50 a month.
Download our more detailed guide to the budget (including current and newly announced tax rates and thresholds) here.
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