How will the Spring Statement 2019 Affect you and your Salon?
The Spring Statement 2019 could have a number of good and bad repercussions for salon owners. Business consultant Ryan Fox shares the lowdown on everything you need to know for the coming months.
In his Spring Statement 2019, chancellor Philip Hammond reiterated what he said in the Autumn Budget. With better than expected income and forecasts, there could be a “Deal Dividend” of £26bn to boost the economy, but only if the Brexit negotiations are successful. Otherwise the extra money will most likely be sucked up by coping with a “No Deal Brexit” which will probably have a negative effect on the economy as a whole.
Growth for 2019 will probably be lower than expected at 1.2% with forecasts of 1.4% for 2020 and 1.6% to 2023 offering a better than expected picture with borrowing reduced but this only applies if there is a smooth exit from the EU.
In terms of tax, the Spring Statement mainly reaffirms the changes announced in the Autumn Budget which should go ahead regardless of Brexit.
Here’s a summary:
Good for the Salon Owner
- The contribution for small companies to the apprenticeship levy is to be reduced from 10% to 5% from April 2019. Good news for an industry that relies heavily on apprentices for its future.
- The personal allowance is currently £11,850 and it will rise to £12,500 from April 2019 and the higher rate threshold to £50,000. This is good news as it means salon owners and stylists will get to keep more of their money before they pay tax.
- Corporation Tax rates will remain at 19% in 2019 and fall to 17% in 2020. Great news for salons who are set up as companies as they will pay less tax.
- The business rates cut of one third over two years from April 2019 for firms with a rateable value of £51,000 should be going ahead but this wasn’t mentioned. This is great news for salons as most will get a welcome saving of thousands of pounds. Check with your local authority to find out how much you will save and when.
Bad for the Salon Owner
- With unemployment so low and a shortage of stylists, workers are calling the shots more and wages are increasing. National Minimum Wages and National Living Wages rise again from April 2019 to the following rates: Apprentice £3.90, Under 18 £4.35, 18 to 20 £6.15, 21 to 24 £7.70 and 25 and overs £8.21.
- Changes to IR35 (anti-avoidance tax legislation), which affect self employed workers are aimed at large and medium sized organisations at this stage but are sure to filter down to small businesses eventually. Another reason to have an employed staff model rather than a self-employed model.
- The Dividend Allowance is now only £2,000 and is likely to disappear from 2020. This means that a salon owner who takes dividends to top up a low salary will now pay 7.5% (over the £2,000) of it in tax a basic rate taxpayer, 32.5% as a higher rate taxpayer and 38.1% as an additional rate taxpayer.
- New making tax digital requirements will start to apply from April 2019 starting with VAT payments. Businesses including salons over the VAT threshold will have to keep digital records for VAT purposes.
Ryan Fox is a Hair & Beauty Salon Consultant who improves salon performance through training and innovation. He also offers an Accountancy Service for salons. For more info visit www.umbrellaconsulting.co.uk