Autumn budget 2017 - a summary of the tax change

Bamboozled by the recent Autumn budget? You're in luck- Ryan Fox, Salon Consultant provides a summary of the tax changes and the implications to your salon business. The personal allowance - Currently £11,500 will be increased in 2018/19 to £11,850 with the tax bands increasing accordingly up the scale. Implications – Generally this is good news for directors and self-employed salon owners as it means the amount you can take out of the business tax free is increasing so you pay less tax. Make sure you are setup correctly as a business to take advantage of this otherwise you may be paying more tax than you need to. Dividends - Dividend Allowance will be reduced from £5,000 to £2,000 from 6 April 2018. Implications – This is bad news for salon owners who are directors, as it means you will pay higher tax on dividend payments. Previously many directors didn’t pay personal tax on dividends with only the company paying corporation tax, but these changes put an additional tax burden that particularly hit small business owners. You may wish to reduce how much you take out of the business as dividends and look at more tax efficient uses of profits by for example reinvesting in your business or saving into a pension scheme for example. Individual Savings Accounts (ISAs) & Stamp Duty Reductions for First Time Buyers - The overall ISA savings limit for 2017/18 and 2018/19 is £20,000 which was increased from £15,240. There are also other specialist ISA’s aimed at helping first time buyers to buy a home called Help to Buy and Lifetime ISA’s and first time buyers paying £300,000 or less for a residential property will now pay no stamp duty at all. Implications – This is worth investigating further if you are looking to buy your first home. Universal Credit - This is being rolled out and will eventually replace benefits such as housing benefit, tax credits and income support by September 2018. Implications – These changes may affect some of your workers on low incomes and often part time workers. Although the government are taking steps to address delays in new payments being made, be aware that it may be worth offering some temporary financial assistance, perhaps in the form of cash advance that they pay back through their wages. Corporation tax rates - The main rate of corporation tax is 19% for the Financial Years beginning on 1 April 2018 and 1 April 2019 and then falls to 17% for the Financial Year beginning on 1 April 2020. Implications – This is good news for companies as it lowers the amount of corporation tax you will have to pay. Class 2 National Insurance contributions (NICs) will be abolished from April 2018 Implications – It may have some negative impact on self-employed individuals with low profits. Off Shore Investments - The government will consult on the best way to prevent UK traders or professionals from avoiding UK tax by arranging for UK trading income to be transferred to unrelated entities. This will include arrangements where profits accumulate offshore and are not returned to the UK. Implications – Don’t go there if you were thinking of it! This is a good move to ensure mainly large companies and rich individuals pay their taxes which can only be good for the UK as a whole. Off-payroll working - The government will consult in 2018 on how to tackle non-compliance with IR35. The legislation aims to ensure that individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. Implications – Along with recent rulings involving so called “gig economy” companies, this may further tighten the ability to justify having self-employed workers in a salon. Watch this space… Business rates - The business rates revaluation took effect in England from April 2017 and resulted in significant changes to the amount of rates that businesses will pay. In light of the recent rise in inflation, the government will provide further support to businesses. Implications – You may be able to ask the Valuation Office Agency to recalculate valuations to reduce your rates. *because of devolution, some measures do not apply in Scotland and in the near future in Wales. Ryan Fox is a Hair and Beauty Salon Consultant who improves salon performance through training and innovation. He offers help and advice on all the issues raised here. Ryan also offers an Accountancy Service specifically designed for Salon Owners to help manage your finances… For more advice on growing your salon or his salon accountancy service visit www.umbrellaconsulting.co.uk