Autumn Statement 2016
The Chancellor of the Exchequer gave his Autumn Statement to Parliament on 23rd November 2016.
So, what does this mean for Freelancers?
What’s the good news?
- The personal allowance will rise to £11,500 and the higher rate threshold will rise to £45,000.
- The following year the personal allowance will rise to £12,500 and the higher rate threshold will rise to £50,000.
- The government will continue to support saving by increasing the ISA savings limit from £15,240 to £20,000 in April 2017.
- The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.
- Corporation Tax remains on track to fall to 17% by 2020.
- The Government will begin to roll out tax-free childcare across Britain in early 2017, said to represent a saving of up to £2,000 per child.
- Letting agent’s fees charged to Tenants are to be banned.
- Abandonment of future Autumn Statements, making the budget an annual event
What’s not so good?
- The VAT Flat Rate Scheme – The government will introduce a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses.
- A technical note on this change published by HMRC states this will not just be a simple increase of percentage but will be based on how much the business has purchased and whether or not it has purchased enough goods not to have to use the 16.5% rate.
- Class 2 NIC’s – It was confirmed that Class 2 NIC’s will be abolished with self-employed individuals qualifying for state pensions through Class 4 and voluntary Class 3 NIC’s.
- Employee Salary Sacrifice tax perks such as mobile phone contracts paid from your pre-tax income via your company are to be tightened however pension payments from your limited company are not affected.
Making Tax Digital
- In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.
This may be a welcome change but remains to be seen. I believe that after initial cash-flow issues have been overcome with paying taxes quarterly, the new system will ensure taxpayers never again have a surprise tax bill at the end of the year, as tax will be paid quarterly. This also means if you have a ‘boom’ year, you will pay the taxes at that time, rather than having a potential cash flow issue the following year if annual profits are more in line with your usual earnings. For more information, see our ‘Making Tax Digital’ article here.
The Full Report
Read the full report here https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016
What’s the bottom line?
We will continue to monitor the changes in taxation over the coming months and will produce articles reflecting the changes that may affect you. Sign you here for email updates.