Chancellor George Osborne took to Parliament again on 16th March to present his most recent budget. He reinforced the changes that are coming into effect from April this year, and also went on to outline the changes planned for the future.
His aim is to get the UK economy back “into the black” by 2020, and to significantly decrease unemployment by encouraging small businesses to develop and employ. Here we set out his plan.
1) Personal allowance
Personal allowance is the amount of money a person can earn before they have to pay income tax. The plan is to increase this from the current £10,600 to £11,500 by the 2017/18 tax year.
2) 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%). The plan is to increase this from the current £42,385 to £45,000 by the 2017/18 tax year.
Higher rate threshold
3) Corporation tax
Corporation tax is the tax paid on limited company profits. The plan is to reduce the rate from the current 20% to 17% by 2020.
4) Class 2 national insurance
Class 2 national insurance contributions are currently £2.80 per week and are paid by self employed people who earn more than £5,965 per year. From April 2018 this class of national insurance will be abolished!
5) Business rates reform
Big changes due to happen in this area. Small business rate relief is due to increase from it’s current rate of 50% to a whopping 100% for businesses where their premises has a rateable value of £12,000 or less.
Tapered relief will also be available for businesses where their shops, offices or warehouses have a rateable value of £12,000 to £15,000.
Finally, the higher business rate threshold will increase from the current £18,000 to £51,000 from April 2017.
These announcements are all good news for small business owners. The Chancellor is encouraging entrepreneurship in the UK, and that is what we need to get the economy back on track.
Please keep an eye out for further updates on these planned changes.