Autumn Statement 2016 – Pro-small business or anti-small business?

Autumn Statement 2016

In his debut, Autumn Statement 2016, the Chancellor announced plans that will continue to negatively impact small business, it looks like we have yet another anti-small business government.

The highlights of the Autumn Statement 2016 are:

A new higher VAT flat rate for ‘service-based’ businesses – aka contractors

From 1st April 2017, “businesses with limited costs, such as many labour-only businesses” will have their VAT flat rate percentage increased to 16.5%.

This is not as simple as it sounds, it’s another complicated set of standards to assess if it applies to you.

IR35 reform for the public sector

From April 2017, the government will reform the ‘off-payroll’ working rules within the public sector.

This will be achieved by moving responsibility for paying the correct tax to the department paying the worker’s company.”

I guess this means all government departments will from April 2017 pay all contractors as employees to avoid penalties.

This begs the question, as pretty much all government departments including the NHS survive on contractors who will they get to work for them? All the costs of an employee with none of the benefits…

And more worrying is when will this extend to the private sector…

Tax avoidance enabling penalty

“the government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC.”

WOW, so if a scheme is defeated after the fact, even if it is one that has counsel opinion, everyone gets a penalty, that takes tax avoidance schemes (do not confuse like the government does with tax evasion) off the table, so will we see Google etc. paying UK tax in the future?

Tax and National Insurance advantages of salary sacrifice schemes to change

From April 2017, the tax and NI advantages of salary sacrifice schemes will be removed, with the exception of childcare, cycle to work schemes, pensions and ultra-low-emission vehicles.

Existing schemes will have transitional arrangements until April 2018, or April 2021 in the case of salary sacrifice arrangements for cars, accommodation, and school fees.

So, if you have gym membership, computer or mobile phone not so great news.

Employee and Employer NI thresholds aligned

From 6th April 2017, the thresholds for both employee and employer National Insurance will be aligned at £157 per week.

Class 2 NIC to be abolished

From April 2018, Class 2 NIC will be abolished altogether.

Self-employed clients will get their entitlement to State Pensions through Class 4 and voluntary Class 3 NIC, which incidentally are at a much higher rate than Class 2.

National Living Wage

From 1 April 2017, the national living wage will rise to £7.50, this is good news for those on low wages but bad news for employers who are already having to cope with increased costs and personal tax burdens imposed by this Conservative Government.

Tax Free Personal Allowance

It was confirmed this will rise to £11,500 from 6 April 2017.

Renters and Buy to Let Landlords

Letting fees have been banned, well actually they haven’t been banned, instead of the renter paying them the landlord will have to.

This is hailed as a win for some, but surely the landlords will just increase rents to compensate?

Buy to Let Landlords have suffered in the latest budget and this autumn statement, one can’t help but think all these attacks on them by the government is only going to force up rents, and that is bad news!

Savers

A new ‘market leading’ NS&I savings bond is to be launched, a rate of 2.2% but only on (up to) £3,000 so not really that great, if it had been £10,000 like last time that we could get excited about.

Insurance Premium Tax (IPT)

I guess the squeeze on our pockets keeps coming, IPT is going up 2% to 12% from June 2017.

Well in this Autumn Statement 2016 the Chancellor has again used a stealth tax that keeps giving, or should that be taking, out of our pockets.

With insurance costs increasing already and IPT getting even more costly those on low incomes will suffer most, again.

So, will you be a winner of loser based on the Autumn Statement 2016?

For more on the autumn statement please read our 2016 Autumn Statement overview.

Author:

Jason is a Qualified Accountant in both the UK and Australia. Jason has for over 28 years advised and supported many hundreds of UK owner managed businesses, through the good times and the bad ones. Jason formed Holden Associates to offer his no nonsense down to earth business approach in 2002. Holden Associates operate Nationally throughout the UK from their Lancashire base.

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