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How will the 2017 budget affect small businesses?

Small business directors and self-employed tradespeople awaited the announcement of the Autumn Budget 2017 with anticipation; the annual Budget often includes changes that can significantly impact the finances of small businesses. If you run a small business, make sure you know how the Budget is going to affect you this year.

Positive news on business tax

For the most part, the Budget offered positive news for business taxpayers throughout the UK. Many SME owners were concerned that the VAT threshold would be lowered in order to collect more tax from small businesses, but this has not been the case. The 2017 Budget actually includes a freeze on VAT and potential reductions in business rates:

– From next year, business tax rates will be indexed to the Consumer Prices Index (CPI), which could mean that rates effectively reduce by around 1% or so.
– The VAT threshold is set to freeze at £85,000 for a minimum of two years.
– Business rates will be reevaluated every three years instead of every five years after the next reevaluation. This should help to avoid steep increases in rates.
– The main Research and Development (R&D) tax credit rate will be increased to 12%.
– Local pubs rejoice! The Budget includes a £1000 business rates discount for local pubs.
– Corporation tax is set to stay at the same rate of 19%.

The decision to index business rates to the CPI, which was originally set to happen in 2020 but has been brought forward by two years, will be well-received. The move has already been applauded by the Federation of Small Businesses (FSB), who said: “It is a real step in the right direction for small businesses.” According to Gerry Biddle, the director of business rates at Deloitte Real Estate, this change will cost the Exchequer approximately £253 million next year alone (https://www.ft.com/content/9844dede-cf93-11e7-9dbb-291a884dd8c6). It certainly demonstrates that the Chancellor has made an effort to prioritise the needs of small businesses.

Investment for small businesses

Many small business owners have been bemoaning the UK’s lack of funding for small businesses for years now, and the 2017 Budget certainly made steps to address this shortfall. The government is planning to increase funding for business investments, which is great news for SMEs hoping to get a piece of the pie this year. £2.3 billion has been set aside for Research & Development, and £13 billion has been allocated to fund SMEs by the British Business Bank.

Scalable tech businesses will also be pleased to hear that the Enterprise Investment Scheme will likely be expanded, and the Chancellor also confirmed that a national retraining scheme will be introduced, which will focus on digital skills and construction. Investment in the future of the UK’s workforce can’t be bad news for employers who will one day be hiring those workers.

Fuel duty rise scrapped

There’s also good news for small businesses who rely heavily on their use of vehicles and fuel; the previously scheduled fuel duty rise, which was set for April 2018 and included both petrol and diesel, has been cancelled. On the other hand, older diesel cars will face higher excise duty from April 2018, but van owners will be exempt from this.

Infrastructure

Increased funding for infrastructure can be great news for small businesses and traders who rely on the UK’s quality infrastructure to operate effectively. The Chancellor announced in the 2017 Budget that:

– A new £500 million fund will be set up for 5G mobile and fibre broadband
– £1.7 billion is scheduled to be invested in transport in cities
– £540 million is set to be invested in electric cars and electric vehicle charging points

No more ‘staircase tax’

Some of the best news to come out of the Autumn Budget is the announcement that the so-called ‘staircase tax’ will be scrapped. This tax, which would have penalised businesses with multiple offices linked by communal lifts, stairs, and corridors, by treating them as if they were more than one property, has long been thought nonsensical and unfair.

The scrapping of this tax will likely save many small businesses tens of thousands of pounds, and it’s been estimated that the tax would hit around 80,000 properties (https://www.ft.com/content/9844dede-cf93-11e7-9dbb-291a884dd8c6). And don’t worry if you’ve already been hit by this tax: Philip Hammond said that not only would the law be changed, but that any extra money already paid by businesses because of the tax would be refunded.

Employee wages and personal tax

As usual, the National Living Wage will see an increase again this year, this time by 4.4% which will make it £7.83 per hour from April 2018. National Minimum Wage will also increase to the following rates:

– £3.70 per hour for apprentices
– £4.20 per hour for 16-17-year-olds
– £5.90 per hour for 18-20-year-olds
– £7.38 per hour for 21-24-year-olds

Some small businesses may feel the stretch that this increase in wages will put on their finances; certainly, many small business owners do not feel that the rise in NLW is consistent with the rise their businesses make in profit. Unfortunately for small business owners, rises in minimum wage standards are an inevitability.

On the flipside, personal tax allowances will rise to £11,850 from April 2018, which is good news for everyone. The higher rate of tax threshold will also rise to £46,350 next year.

While it’s not all good news, there’s plenty to feel positive about for small business owners in the Autumn Budget 2017, and it’s certainly starting to look like the age of austerity is behind us.

If you’re a small business owner looking for a professional and knowledgeable accountant in Melton Mowbray, we may be able to help. Please don’t hesitate to contact us for assistance in paying business tax, accounting, and financial advice.

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What Is “Making Tax Digital”?

If you’re confused by HMRC’s new Making Tax Digital plans, then you’ve come to the right place.

So, what’s new?

  1. HMRC intends to join up all of it’s internal systems to create one account for each taxpayer, that can show all of their different taxes within HMRC. Via your Digital Account, you could view all your payments and offset overpayments in one tax against any underpayments in others.
  2. MTD also means that quarterly filing and potentially payments for businesses and landlords may also become mandatory. The first stage of MTD will affect small unincorporated businesses and landlords. The second stage is VAT and the third and final stage will affect companies, but not until 2020.
  3. A new late filing and penalty system will eventually come in to quarterly returns and declarations.
  4. Accounts and tax returns are likely to become quarterly, but businesses will still need to prepare year end accounts in order to reconcile their MTD accounts and payments. They will also be required to submit an end of year declaration, rather than a Self Assessment or Corporation Tax Return.

For further expert advice, please contact our accounts in our Melton Mowbray office.

 

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SAVE MONEY WITH THE FLAT RATE VAT SCHEME

Have you heard about the new Flat Rate VAT Scheme and are wondering how it will affect you and your business? Don’t worry. We’ve put together a brief guide explaining what it means for you.

The New Flat Rate VAT Scheme 2017 came into effect from the 1st April 2017. This new scheme sees a new 16.5% flat rate for businesses who have limited costs. The scheme is intended to remove any opportunity for contractors to make high splurges from the scheme and to stop the “aggressive abuse” of the system. The new flat rate will affect those businesses who are using the VAT Flat Rate Scheme, but who spend very little on goods, including raw materials – an example of this is firms providing different services. If you find yourself caught by the new rules you will end up paying more VAT.

<h2>General background of the Flat Rate Vat Scheme</h2>

The VAT Flat Rate Scheme (FRS) is an accounting scheme for small businesses. Businesses can currently determine what flat rate percentage to use by reference to their different trading sectors. Those businesses who currently use the scheme or intend on joining the scheme must also determine whether they meet the “limited cost trader” criteria to include themselves under the new flat rate scheme. This is easier to determine for some businesses than others and those who are unsure will need to complete a simple test to work out whether the 16.5% rate is for them.

You should compare your VAT inputs and trading activity to see if you fall into the category of a ‘low-cost trader’ and if you do, then it’s up to you to calculate whether it will be beneficial or not to switch to the standard VAT scheme and see if you can pay less tax. If you need assistance from a reliable accountant, then visit our accountants in Melton Mowbray for expert information.

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HOW TO REGISTER FOR AND FILE YOUR SELF ASSESSMENT TAX RETURN

You will receive a fine from Her Majesty’s Revenue and Customs (HMRC) if you file a tax return late or fail to file one at all. Filing a tax return on time does not mean you pay less tax, but at least you can avoid paying any penalty.

We have put together this simple guide to help you unravel the filing process.

How to register with HMRC

You will need to first register with HMRC for self-assessment before you can file a tax return.

You can register with HMRC either by completing a form on HMRC’s website or by completing a paper form which you then post to HMRC.

If you are self-employed, you must register with HMRC immediately when you set up your business.

If your business is a partnership, you will need to register your business for partnership tax and each individual partner will need to register to file a tax return.

You must register by 5th October following the end of the relevant tax year. So for example, for the tax year ending March 2015/2016, you must register with HMRC by 5 October 2017.

How to file your self-assessment tax return

Once you return your completed application form, provided HMRC have all the information they need, they aim to send you a letter with a Unique Taxpayer Reference (UTR) within 10 working days.

Once you receive your UTR, you can log back onto HMRC’s system to complete the tax return or complete and return a paper tax return.

Time limits

The time limits for filing a tax return are strict. HMRC charge a £100 fine if your tax return is up to 3 months late and the fine increases thereafter.

Paper tax returns must be submitted by midnight on 31 October 2017 while online tax returns must be submitted by 31 January 2018.

Contact our Accountants in Melton Mowbray today for more assistance with filing your self-assessment tax return.

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HOW THE TAX CHANGES THIS YEAR WILL AFFECT YOU

Thinking about tax is often the last thing on your mind when running a busy and successful accountancy firm. With changes year-on-year, even for those on top of it, understanding tax can be a burden on time and resources. That is why we have compiled a list of the major changes for the tax year 2017-18 which will affect every accountant in Melton Mowbray and beyond – all with the aim of helping you pay less tax.

Corporation Tax

Coming into effect back in April 2017, the first major change set out by the government was to cut corp tax to 19%. It is worth keeping an eye on the fact the Chancellor earlier this year stated the aim was to reduce the rate to 17% by 2020.

ISA Limit Changes

The annual allowance limits for ISAs have increased from £15,240 up to £20,000.

Personal Allowance

The total earnings for an individual before they incur income tax has risen to £11,500, and the higher rate threshold has been increased to £45,000 (in Scotland this is £43,430).

Business Rates

For businesses in England, a rate relief of 100% will be available to businesses occupying a property valued at £12,000 and under.

VAT Registration threshold

The margin for VAT Registration has risen to a minimum turnover of £85,000 for small businesses.

Money purchase annual allowance

Those individuals looking to flexibly access money such as pensions will see their allowance reduced from £10,000 to £4,000.

Domicile

For tax purposes, any person holding residency in the UK for at least 15 of the past 20 years is now deemed UK domiciled.

Salary sacrifice & employee benefits

Employer NI contributions, salary sacrifice schemes, and income tax relief have been removed. However, pensions, childcare, and various other employee benefits such as cycle-to-work have been left untouched.

For these and many other of the various tax year changes (especially ones you think will affect your clients), it is worth reading about them in more detail at www.gov.uk, where you’ll find up-to-date figures and step by step guides on the changes made and how they affect us.

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ALL YOU NEED TO KNOW ABOUT YOUR INCOME TAX 2017-18

Income tax can be very taxing for many people. Many people find it quite difficult to understand how income tax is calculated, what the various tax codes mean, who is required to pay income tax and so on and so forth. What is clear though, is that Her Majesty’s Revenue and Customs (HMRC) can come after you if you unlawfully pay less tax than you are required to pay, which is one good reason to get it right.

Below we cover the essential aspects of income tax.

What is income tax?

Income tax is tax you pay on earnings you receive. These earnings could either be income you receive from your employment, pension, some savings, rental income or profits you make from self-employment, to mention a few.

How much income tax is payable?

This depends on your tax bracket.

For the 2017/2018 tax year, the first £11,500 of earnings is a tax free personal allowance.

All other earnings above £11,500 will be charged at the following rates:

• Basic rate of 20% on earnings from £11,500 to £33,500
• Higher rate of 40% on earnings from £33,500 to £150,000
• Additional rate of 45% on all earnings in excess of £150,000

How is income tax paid in the UK?

• Your employer deducts income tax from your wages using the Pay As You Earn (PAYE) system before paying your wages to you, or;

• You file a self-assessment tax return to HMRC. HMRC calculates what you owe based on the information you provide in the self-assessment. People with complex tax arrangements or those who are self-employed usually use the self assessment procedure.

As accountants in Melton Mowbray we can offer the full range of accountancy services to individuals and businesses in the area. Contact us today.

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