Tuesday 6th December 2016
2016 Autumn Statement
Michael has reviewed the Autumn Statement in detail and picked out the most relevant points that may affect clients of CCF.
Obviously this is not law yet, so watch this space and we will update you further after the Budget next year.
The first post Brexit Autumn Statement, with a new Chancellor, Philip Hammond, was eagerly awaited given the changes in the political landscape after the vote on June 23rd.
There were a mix of surprise announcements, and those that were somewhat expected, although one of the most fundamental announcements did come out of the blue. The chancellor announced that the traditional Spring Budget was to be no more, and this was to be the final Autumn Statement. From 2017 it will be all change, as the Pre Budget statement will be made in March, with Budget Day moving towards the end of the Year.
Similarly, some of the tax changes announced had already been mentioned previously. Mr Hammond reaffirmed the government’s commitment to raising the personal allowance to £12,500 by the end of the Parliament. It will take another step towards this from April 2017, when the 2017/18 personal allowance will be £11,500.
40% taxpayers also gain some relief, with an increase in the basic rate (20% threshold) to £45,000 in April 2017. The ultimate aim is that the higher rate will kick in at £50,000 by 2020.
The drive to simplify the tax system also continues with the alignment of the weekly amount at which Employer and Employee National Insurance becomes payable to £157 per week from 2017/18.
For the self-employed, Class 2 NIC is abolished, although the self-employed NIC requirement is still covered by Class 4, which is payable along with self-employed tax bills in January and July.
Although Class 2 NIC is no more, the Treasury’s national insurance take will increase through a new charge on termination payments more than £30,000 from April 2018.
Another measure which may hit some employees will be a restriction in the number of salary sacrifice schemes, whereby certain payments can be made from gross salary, potentially saving workers tax and national Insurance, whilst their employers benefit from an employer NIC saving. Interesting, some of the more common schemes have not been touched – pensions, childcare, cycle to work and on some very low emission vehicles.
There are a couple of changes to taxes for larger, multinational companies but the main Corporation Tax announcement of interest to many owner manged businesses was the confirmation that Corporation tax will decrease to 17% by 2020, thereby continuing to encourage post Brexit Britain as a competitive place to do business.
One measure which was unexpected was the announcement of changes to the Flat Rate Scheme, which was introduced a few years back to simplify VAT for small businesses, by announcing a Flat Rate percentage for each business sector. This aimed to replace the regular procedure of deducting VAT paid on purchases and expenses from that collected on income, and the overall aim was to ease the administrative burden on owner managed businesses. However, a benefit of this has been that many businesses with a very low cost base have been able to benefit financially from the scheme, and so to combat this, the government have introduced an overall Flat rate of 16.5% from April 2017. This will not apply to the businesses using the scheme, only those with limited costs and discourages businesses from using the scheme to reduce tax liabilities rather than administration.
As always, if you would like to discuss any element of the changes, please do not hesitate to contact us.