In July 2015 Chancellor George Osborne took to Parliament to present his Summer Budget. During his speech he announced a number of changes that are due to affect small businesses all over the UK from April 2016. As April draws nearer we felt it only right to remind you of the changes to come so that your small business is prepared.
1) National living wage
From 1 April 2016 the current national minimum wage of £6.70 per hour is to be replaced with a “national living wage” of £7.20 per hour for all workers aged 25 and above.
2) Personal allowance
Personal allowance is the amount of money a person can earn before they have to pay income tax. Currently for the 2015/16 tax year that amount is £10,600. The personal allowance for 2016/17 will increase to £11,000.
3) Higher rate threshold
Once you earn above the personal allowance you are liable for income tax at the basic rate (currently 20%). Once you reach the higher rate threshold you are then liable to income tax at the higher rate (currently 40%).
For the 2015/16 tax year this threshold is £42,385. This threshold is increasing for 2016/17 to £43,000
4) Dividend tax reform
As explained fully in our article “New Dividend Tax : The Reality For Your Pocket” the 10% dividend tax credit is being replaced with a £5,000 tax free dividend allowance, and the basic rate of dividend tax is to reduce from 10% to 7.5% from April 2016.
5) Employment allowance
From 1 April 2016 there will be an increase in the employment allowance from £2,000 to £3,000. This allowance was introduced in April 2014 and was designed to help employers reduce their national insurance bills.
6) Capital gains tax (CGT)
Basic rate CGT is currently 18% whilst higher rate CGT is 28%. With effect from 6 April 2016 the rates will change to 10% and 20% respectively. This move will hopeful encourage the sale of assets such as businesses and investment properties.
We feel that these changes are a huge step in the right direction to get our economy back on the right track. It has never been a better time to have a small business, and with further changes due to be implemented over the next few years, it will only get better for small business owners.