At the beginning of each new financial year, there are changes made to taxes. These can have a huge impact on companies, sometimes introducing measures that will benefit a business, and some that require a period of intense planning to ensure minimal damage to a company. This year, the Budget had some unexpected announcements for businesses. According to Chancellor George Osborne, this year's tax reforms would be a “Budget for small business”.
National Living Wage
For all people over the age of 25, as of April 2016 the National Living Wage is £7.20 per hour. All workers who are aged 24 or younger will remain on the minimum wage, which will be unchanged. This could have a serious impact on small businesses, which will have to implement a series of checks to make sure that all workers are being paid correctly. Once eligible staff have been notified of their new rate of pay, changes may be required to the current payroll system, which may require significant investment. One of the simplest methods of implementing the changes is to outsource accounting to a professional so that all changes are taken care of.
The VAT threshold will increase by £1,000 this year, meaning that the new threshold from April 2016 will be £83,000. This may have an impact on small businesses and self-employed people. The threshold for deregistration will be £81,000 – up from its previous level of £80,000. This change is expected to keep around 2,000 businesses out of the VAT system. However, some companies may benefit from voluntary registration.
Business rate relief
The threshold for small business rate relief will be increased, benefiting around 600,000 small companies. The threshold will be increased from £6,000 to £15,000, while higher rate relief will also be increased from £18,000 to £51,000. The annual saving for many companies will be around £6,000.
The rate of Corporation Tax will be lowered to 17% from 2020. The change will come into effect for financial year commencing 1st April 2020. This policy is expected to encourage business investment in the UK, making the country's tax system more competitive.
There are many more tax changes that have been introduced, including changes to the way that dividends are taxed. Speaking to an advisor will ensure that you are aware of all changes. If you would like to know how you can maximise tax benefits for your company, contact us for an informal meeting.