What does the Autumn 2017 budget ACTUALLY mean to you?

In the pub over Christmas, I got asked by a mate of mine what I thought of the Autumn Budget announcements. Knowing I’m an accountant, all he really wanted to know was how does all this complicated political jargon affect whether he could afford an extra round of drinks in the pub each Friday night, and a kebab on the way home?

As an expert in self-employed tax, I can only really comment on the areas I get involved with on a daily basis so I thought I’d use this blog to pick out some key points and de-jargon them, so that every other ‘Joe Bloggs builder’ having the same thoughts about his Friday night intake, can make a well informed decision!

Here goes……….

The personal tax free allowance goes up to £11,850

In simple terms;

It is currently £11,500 a year. This means you can earn up to this amount totally tax-free each year. By increasing it by £350 quid, it puts £75 more in your pocket each year from April 2018 onwards (about 15 kebabs ?). If fortunate enough to be earning over £45,000, you will be able to earn £46,350 without getting taxed at the higher rate. Worth about another £160 in your pocket.

Hammond confirmed he is not going to reduce the VAT threshold for at least 2 years

In simple terms;

If self-employed and you turn over more than £85k in one year, you have to register and charge your customer the additional 20% VAT. Not only does it increase your workload (and my fee for doing your VAT returns), but if you are selling your services to a person or a company that isn’t VAT registered, you become 20% more expensive but you personally will see no benefit. By reducing the threshold from £85k, more people would have fallen into the bracket, pushing up the cost of trading, which would no doubt affect the ability to make a decent living.

There will be no changes to National Insurance deductions for the Self Employed.

In simple terms;

There are 2 types of National Insurance deductions; Class 2 (about £2.85 a week), and Class 4, which is taken when we do your end of year tax return. For Class 4, you are taxed at 9% for every penny you earn between the £8,164 and £45,000. Again, for those lucky enough to be earning above £45,000, you pay 2% for every penny earned over £45,000. In the previous budget, the Chancellor said the 9% would go up to 11% and he was scrapping Class 2 all together. He has now delayed this decision for another year (phew I hear you say!), so Class 2 still needs paying until at least April 2019.

The Chancellor has decided to keep Corporation Tax of Limited Companies at 19%.

In simple terms;

If you have made the wise decision to go Limited, every penny profit you earn will be still taxed at 19% before you take a dividend. For those not yet limited, dividends are just a form of income you can take from your business, generally, once you have enjoyed the new tax free allowance of £11,850. Unlike income as a sole trader, you do not incur a National Insurance deduction on dividends. There can be a decent win on this depending on what you earn, and it is worth considering.

The Chancellor announced that he will give private landlords the ability to claim a fixed rate tax deduction for business-related journeys.

In simple terms;

To all my landlord clients, from April 2018 you will be able to simply claim 45p a mile against your tax bill for trips to B & Q rather than using an overly complicated system of capital allowances, and retaining and submitting a glove box full of fuel receipts. As your accountant, all we will need is a sheet documenting the date, amount of miles and the reason for the journey.

Whilst I may have only covered off a few of the points from the Budget announced back in October, there is still plenty more knowledge I want to share with you, to ensure you keep your hard earned cash in your pocket and not handing it over to the Tax Man. Got a burning question on your finances? Get in touch today!

I’m off to print a copy and give to my mate… I think he is still at the pub!

Cheers,

Gary the Tax

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkedin