Budget 15 – Small Businesses Hit Hard
Budget 15 – Small Businesses Hit Hard
We delve into the latest budget and highlight the points which are relevant to your business.

With the first all-Tory budget in years, George Osborne’s post-election offerings lay out the plan for the UK’s economy over the next couple of years (or at least until the next budget).

We have picked out the key personal tax and business tax points for you:

Personal Tax

  • Personal tax allowance to go up to £11,000 from April 16 up £400 from April 15, with a view to reach £12,500 by 2020.
  • Basic rate band extended from £42,385 to £43,000 next year.
  • National living wage to be introduced for the over 25’s, £7.20/hr from April 16 with a view to reach £9/hr bt 2020.
  • Inheritance tax threshold to a phased increase to £1m, with by a new £175,000 family home allowance.
  • Relief on mortgage interest for buy-to-let buyers to be restricted to the basic rate.
  • Rent-a-room relief scheme to rise to £7,500.
  • Personal tax on dividends will increase to 7.5%, 32.5% and 38.1% from April 2016, replacing the notional 10% tax credit up to the basic rate band.
  • New rates indicate that the first £5,000 of dividends will be tax free, and 7.5% will be charged up to the basic rate, meaning an increase in personal tax of £1,700 from April 2016.
  • Abolishment of the Permanent non-dom status from April 2017. If you have lived in the UK for 15 of the past 20 years, you’ll pay same taxes as other UK citizens.

Business Tax

  • Corporation tax to be cut to 19% in 2017 and 18% in 2020.
  • National Insurance employment allowance for small businesses to increase to £3,000 from 2016.
  • Annual investment allowance will be fixed at £200,000 from January 2016, up from the previously planned £25,000.

Ross Martin says “This summer budget is a nightmare for Small Businesses,” he adds, “Those working hard and extracting funds from small family-owned companies have just been kicked in the teeth with new legislation on ‘Dividend Taxation’.”

This means that with an effective removal of nearly all tax-free dividends, and a general increase in tax of 7.5% (minimum) across the board on dividends, this will cost a business earning £150k profit in the region of £9k p.a.  and at £250k this rises to an even greater loss of £15k.

Click here for the guidance: PDF Gov Guidance

Ross says, “We will no doubt hear plenty of other “headline” policies, such as the 1% reduction in corporation tax but, with this additional burden costing the same as, for example, the annual cost of private school fees, in our opinion businesses need to plan their strategy so as not to fall behind.”

“Fortunately, our alternative strategies remain unaffected.” There is some good news, thank you Ross.

If you would like to know more or chat through any options or the consequences of this budget, please do not hesitate to call us on 01872 300232 or email us at hello@hivebusiness.co.uk.

Ross Martin
By Ross Martin Management Consultant
If you have any questions or comments about this article, please get in touch.
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