The Spring Budget has been delivered with the aim to enhance economic stability following the Brexit vote. So what tax changes will affect businesses across the UK?
Salary sacrifice arrangements will see changes from 6th April with National Insurance benefits and income tax benefits being removed. There are also changes to termination payments to stop changes being made to the £30,000 exemption currently in place. This will see the rules tighten around income tax from April 2018. This will mean that termination payments over £30,000 will be susceptible to National Insurance Contributions.
Starting with companies, they will see corporation tax reduced to 17% beginning in 2020 from the current rate of 20%, the rate will drop to 19% from 2017. Any rules surrounding loss relied for companies will be altered so that it is more up-to-date and so, it will enable a more flexible use for business losses. It will also be possible for businesses to bring forward any trading losses and offset them against profits and income that is received from other sources or other group companies. However, there will be a restriction in place for loss relief for companies that have taxable profits above £5 million and so any losses that are brought forward can only be offset against half of the profits over and above £5 million. New rules will be implemented that will put a cap on tax relief on all interest that is paid by companies up to 30% of all taxable earnings within the UK or on a net interest to earnings ratio for a worldwide group.
From 2018, class II National Insurance will be eradicated and as part of the review, the tax differential that has been created by choosing to run your business as self-employed will see an increase in the rate of Class IV National Insurance payable by a self-employed individual would come into effect following new legislation. There were plan to increase the rates by 1% from 2018 with a further 1% increase in 2019 although these plans have been scrapped with the Class IV insurance rate continuing to remain at 9% for any profits up to the profits limit.
Tax will become Digital
The government is still pushing the making tax digital scheme, but HMRC have announced that there will be a delay in the implementation of quarterly reporting for unincorporated business as well as landlord that have a turnover that remains below the VAT threshold which currently sits at £83,0000 until 2019.
For unincorporated businesses, a simplified and extended cash basis will be introduced in order to make the switch easier and more efficient. Those businesses that have a turnover of £150,000 or less will be able to determine profits using the cash basis which will enable them to be more certain as to when income and expenses are being recognised. The maximum limit will change to £300,000 and anything above this will mean that the cash basis will no longer be used.
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