Delivering the last ever Spring Budget to Parliament the Chancellor said his announcement would set out a ‘brighter future’ for Britain.
However, South West-based accountancy firm Milsted Langdon said that the future was not looking quite so bright for the UK’s business owners and self-employed entrepreneurs following Philip Hammond’s statement.
As part of his drive to make ‘taxes fair’ for all, the Chancellor said that the Class 4 National Insurance Contributions paid by self-employed workers would rise in the next few years.
This will start with a one per cent increase from the current rate of nine per cent to 10 per cent in April 2018, followed by a further one per cent rate rise in April 2019.
The Chancellor also announced a cut to the dividend tax allowance, from its current rate of £5,000 to £2,000 from April next year.
The previous Conservative government also changed the way in which dividends were taxed in April 2016, increasing dividend tax rates by 7.5 per cent across the board, whilst introducing the flat rate personal dividend allowance of £5,000.
The full impact of the existing changes will not be felt until January 2018, and so this new announcement is likely to be a particularly unwelcome addition.
Rob Chedzoy, tax partner at Milsted Langdon said: “The Government’s ongoing attack on the self-employed and business owners fails to recognise the massive contribution and entrepreneurial risks that these two groups make to the British economy.
“While I am all for a fairer tax system, the gradual erosion of incentives available to small business owners and entrepreneurs is disappointing, and will increase the tax burden for many hardworking family owned companies.”
Ahead of the Budget a major issue for businesses across the UK was the increase in business rates this April following the latest revaluation, which is expected to lead to a rise of more than 40 per cent for some businesses.
Philip Hammond said the rates brought in £25 billion to local authorities and that he couldn’t scrap the rise, but he did pledge an additional £110 million to help businesses losing small business rate relief.
This is on top of an additional £300 million of discretionary funding given to local authorities to help those facing the most extreme rate rises.
During his speech, the Chancellor also pledged an additional £690 million spending on infrastructure for authorities across the UK and £270 million for disruptive technologies, such as robotics and self driving cars.
“The business rates rise is something that a lot of businesses are concerned about, so any additional funding in this area is welcome, but a lot more could have been done,” said Rob.
“Businesses will also appreciate the additional infrastructure spending and with the Chancellor focused on funding for highly technical industries and training there are some definite winners from this Budget.”
A measure not mentioned directly in his speech, but that will have an effect on some businesses is the change to VAT registration from next month.
According to the Budget papers the threshold will rise from £83,000 to £85,000, while the deregistration threshold will rise from £81,000 to £83,000.
“This will have a major bearing on those facing the Government’s digital tax plans next year, as those under the VAT threshold will be able to defer their quarterly reporting requirements for an additional year until April 2019,” added Rob.
The Budget also re-affirmed the Government’s commitment to lowering Corporation Tax to 17 per cent by 2020 and its pledge to raise the personal tax allowance, which will increase to £11,500 from April 2017, while the higher rate tax threshold will also increase to £45,000.