Autumn Statement – what does it mean for you?
Philip Hammond delivered his first (and last) Autumn statement last week, here’s a quick guide on how it will affect you.
Tax and NI
- In 2017/2018 the tax-free personal allowance will be increased to £11,500. This is aimed to be increased to £12,500 by the end of parliament.
- In 2017/2018 the higher rate tax bracket will rise up to £45,000. This is aimed to be increased to £50,000 by the end of parliament.
- Corporation Tax is still aimed to be reduced to 17% by 2020.
- Tax savings under salary sacrifice schemes will be removed from April 2017 (with the exception of ultra-low emission cars, pensions, childcare and Cycle to work).
- The National Living Wage will increase to £7.50 an hour from April 2017.
- Employee and employer National Insurance thresholds will be equalised at £157 per week from April 2017.
- Insurance premium tax will be increased to 12% in June 2017.
Flat Rate VAT
A new VAT rate of 16.5% will be introduced from 1 April 2017 for businesses with limited costs, e.g. many labour-only businesses, to tackle abuse of the Flat Rate Scheme. A ‘limited cost business’ is one which incurs costs of less than 2% of VAT inclusive turnover or, if greater, less than £1,000. Unfortunately, this may increase the tax burden of affected limited companies by thousands each year.
The Autumn Statement confirmed that next year’s proposed public sector IR35 reforms will go ahead as planned, meaning that recruitment agencies will be responsible for ensuring that contractors are correctly operating the IR35 rules. If deemed to be caught by IR35, the public sector organisation or agency will be forced to pay the contractor as they would an employee via the PAYE system.
Also those public sector contractors caught by the new IR35 rules next April face a further penalty as they will no longer be able to write off a flat 5% allowance against their Corporation Tax bills to cover the administrative costs of running a company. The Government claim this reflects “the fact that workers no longer bear the administrative burden of deciding whether the rules apply.”
Making Tax Digital
The Government intends to publish its response to the Making Tax Digital consultations in January 2017.
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