What impact does the last Autumn Statement have on your Family Business?

Today we heard the Chancellor’s last Autumn Statement which at first sounded like a resignation speech was to follow but simply a timing switch for the budget and the statement.  In 2017 it means that we will have two budgets roughly 8 months apart; one for 2017/18 and the second for 2018/19.  So what impacts will it have on your family business over the next two and a half years?

Making Tax Digital

The justification for the timing change is to allow the Finance Act for a given tax year to be given Royal Assent before the tax year it relates to starts.  In the past it has tended to be granted in August within the tax year in question. So logically thinking it makes sense and allows time for more proactive planning, however, I also believe it is confirmation that the timescale for Making Tax Digital will not be adjusted.

For those who have not heard about the plans afoot by HM Revenue & Customs to ‘Make Tax Digital’ it is described by them as giving the UK the most advanced tax system in the world.  From the other side of the fence it gives them access to more information in a timely manner which will auto populate individual tax accounts but also requires quarterly submissions.  This is surely an increased compliance burden on Family Businesses which they counter by claiming that businesses want to know what tax they have to pay earlier than after a complete year, and this is what they are providing to taxpayers.

The reason I believe the announcements made today are hinting that we are staying on course is because of the timescale as shown below:

  1. Spring 2017 – Budget (2017/18)
  2. Autumn 2017 – Budget (2018/19)
  3. April 2018 – Making tax digital compulsory for unincorporated non VAT registered businesses and landlords
  4. April 2019 – Making tax digital for all unincorporated VAT registered businesses
  5. April 2020 – Making tax digital compulsory for all

The timescale is not perfectly aligned and allows for HM Revenue & Customs systems to be updated with final tax rates and bands before the 2018/19 tax year commences.  This will ensure the new system is fully operational from 6 April 2018, although time will tell if it works correctly from day one!

Key Tax Issues

National Living Wage – As expected this increases in April 2017 to £7.50 which many expected to be higher.

Corporation Tax – Remains on course to reduce to 17% by April 2020.

National Insurance – Alignment of limits for employee and employers Class 1 National Insurance from April 2017. Confirmation of the abolishment of Class 2 National Insurance for the self employed from April 2018, the same date as ‘Making Tax Digital’!

Salary Sacrifice – From April 2017 simplification which means a number of extravagant salary sacrifice arrangements will no longer be approved.  Pension contributions, childcare vouchers, ultra low emission vehicles and cycle to work schemes are going to be the only approved deductions.

Income Tax – Personal allowances to increase to £11,500 in April 2017 with a view to reaching £12,500 by April 2020.

Rural business rate and small business rate relief – increased to 100% from April 2017

Family businesses are unique and whilst they contain overall trends the impact of the announcements today will have a varying impact.  One thing that we can all be certain about is that the government are set on making tax digital, something which will impact on every individual and business in the UK by the end of this parliament.  As the tax landscape continues to change and compliance burdens change, it becomes more important than ever to plan and be ahead of the curve.  Family businesses are renowned for innovation and evolution to ensure they continue to be successful and I am sure they will continue to do this in a post Brexit Britain regardless of what HM Revenue & Customs throw in their way!

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