Key points of the spring budget for SMEs and Investors

by | Mar 10, 2017 | Investment News, Small Business News

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A brief summary of how small to medium business owners and investors are affected by the 2017 UK spring budget.

Philip Hammond’s first and final Spring Budget this week (from now on he will only be publishing an Autumn budget each year) has definitely not made him any friends within the ranks of the self-employed that’s for sure.

Key Points

  • UK growth up this year; borrowing is coming down
  • Increase in taxes for the self-employed
  • Tax free dividend allowance drops from £5,000 to £2,000 from April 2018
  • Measures for business rates amount to a £435m cut, including a £1,000 cut for 90pc of pubs

NI Hike – One of the biggest points that has already riled small business owners is the hike in National Insurance which will rise from 9% to 10% next year, and 11% in 2019. Much as this is set to raise £2bn in extra tax revenue in the current Parliament.

As Mr Hammond put it this is because lower NI for the self-employed “cost our public finances over £5bn this year alone. That is not fair to the 85pc of workers who are employees

It’s easy to see why those affected are unhappy with this when one considers that although the self-employed have been paying less in NI, they arguably don’t have the benefit of paid holiday or sick leave.

What does the NI rise mean in monetary terms? The Chancellor believes this should raise the government £145 million a year by 2021-22 at an average cost of 60p a week to those affected.

Tax-free dividends slashed – This affects self-employed people who work via a personal service company and pay themselves via dividends and investors.

From April 2018 the tax free dividends allowance will be reduced from £5,000 to £2,000 for directors and shareholders.  Although that said, it’s investors with more than £50,000 in stocks and shares outside ISAs that will be affected.

Business rates – Before the budget, the Chancellor was already facing criticism from businesses over the higher business rates. He’s tried to tackle this by making the following three concessions:

  1. Any business currently losing small business rate relief will not see their bill increase next year by any more than £50 a month.
  2. 90 per cent of local pubs will be given a £1,000 discount on their business rates bill.
  3. Local councils will be given a £300 million fund to offer discretionary relief for hard-hit businesses affected in their area.

 

15th March 2017

N.B. Since publishing last week the Government has retracted the 1% raise on National Insurance for self-employed.

 

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