16th May 2017
Wise & Co clients will already have received our Spring Budget Review, a comprehensive guide to the budget released straight after the Chancellor’s budget speech to Parliament. You can access the report from the latest publications section of our website. Here, Managing Partner Sharmini Woodings highlights the areas that stood out for her.
National Insurance contributions
We can’t ignore the U-turn on raising National Insurance contributions for the self-employed. It caused an outcry at the time, not least from the government’s own backbenchers, who were concerned that the changes broke a clear manifesto promise. In the face of such opposition, the Chancellor reversed his decision. This is an issue that is likely to rear its head in the future, though, as there is a desire to make NICs equal for those in employment and those who are self-employed. The key argument for self-employed workers is whether they are then entitled to similar benefits – those quoted most often are holiday, sickness and maternity pay. The biggest question for the government now, however, is how they are going to raise the money that this measure would have generated.
R&D tax credits
The Research and Development tax credit scheme is designed both to encourage investment into the UK and to support UK businesses investing in original R&D. These tax credits allow innovative businesses to reinvest in R&D, increase their workforce and ultimately expand the business. Claiming this relief is currently pretty onerous for businesses, particularly SMEs, and the Chancellor acknowledged this in his speech, however we await the details.
Dividend allowance reduction
Taking a dividend is the way that many small businesses pay themselves in a tax-efficient manner. Prior to the Spring Budget, the dividend allowance was £5,000, so shareholders could take this amount in dividends each year without paying tax. This still applies until April 5 2018, but after this, the allowance falls dramatically to just £2,000.
The new Apprenticeship Levy has come into force and is the way that the government has decided to raise money to fund new apprenticeship schemes. In this case, employers with an annual salary bill of more than £3m will have to pay 0.5% of that part of their payroll which is over £3m. The levy is paid into an account which the employer can access within 24 months to fund apprentice training. Funds will also be made available to those employers who do not pay the levy but want to provide apprenticeship schemes.
The snap calling of the General Election has resulted in many clauses that were due to take affect from April 2017 being dropped from the Finance Act. Therefore the timescales outlined in this article are subject to change. We will keep you informed as and when we receive further information.