5 new tax year changes (for small businesses)

5 new tax year changes (for small businesses)

April 11, 2017

Posted in:
Small Businesses

Calling all small business owners! Here’s an update on the changes to tax law starting in April 2017 that could have an impact on your business.

1. New VAT rate: ‘limited cost trader’

Some small businesses currently use the VAT flat rate scheme (FRS) to work out how much VAT to pay each quarter. If you use FRS and spend less than 2% of your sales on goods, not services, in an accounting period, or less than £1,000 a year on certain goods, then you may find you now have to use the new ‘limited cost trader’ rate.

The limited cost trader rate is set at 16.5%, rather than the rate applicable to your business’s trade.

2. VAT thresholds going up

If you’re not yet registered for VAT you now won’t have to do so until your VATable sales go past £85,000 a year (or within the next 30 days). This is an increase from £83,000 the previous year.

If you’re already registered but want to de-register for VAT, which you may decide to do based on the changes to the flat rate scheme (see above), then you’ll be able to do that if your VATable sales are below £83,000 a year from 1st April 2017 (before that date the threshold was £81,000).

3. Corporation Tax reduced

Corporation Tax has been reduced from 20% to 19% for financial year 2017/18. If your business is registered as a limited company then you’ll pay Corporation Tax at a lower rate than you did last year.

4. Changes to legislation for contractors

IR35 is a piece of legislation that allows HMRC to collect additional payment where a contractor or freelancer in the public sector is an employee in all but name. Previously you could have decided if you did or didn’t fall under IR35. Now, if you work in the public sector it will be for the public sector body engaging you to decide if you fall within IR35.

You can use HMRC’s new tool to determine if your contract is within IR35. If it is, then your public sector clients will have to deduct Income Tax and National Insurance from your invoices before paying the difference over to you.

5. Income Tax rates raised

From 6th April there have been changes to the Personal Allowance, the Basic Rate Limit and the Higher Rate Threshold for employees in England and Wales.

2016 to 2017 2017 to 2018
Personal,allowance 11,000 11,500
Basic Rate,Limit 32,000 33,500
Higher Rate,Threshold 43,000 45,000

And if you live in Scotland, remember that from 6th April 2017 the Scottish government set different tax bands from the rest of the UK, meaning that if you’re a higher-rate Scottish taxpayer you’ll see your bills go up.

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