Chancellor Philip Hammond has revealed that the first budget since the dramatic snap General Election will take place on Wednesday 22nd November. The government will use this to set out their economic plans for the coming year.
What we know about the budget
In a video announcement, Philip Hammond said this was an opportunity to “set out our thinking on how to keep the economy strong and resilient and fair – an economy that works for everyone”.
Apart from this, little is known about details. But we do know that the government is planning on moving to a single budget each year from next year.
“No other major economy makes hundreds of tax changes twice a year and neither should we”, Mr. Hammond stated in his inaugural Autumn Statement last year. He went on to announce that the government will be moving to only one annual budget, with the Spring budget scrapped from 2018 onwards.
This means that pending unexpected changes in the economy, the government will still be able to announce actions in the Spring Statement, but that is will not be a major fiscal event from 2018 onwards.
Steven’s predictions for the coming Autumn Budget
Some of these are very likely, some are more like whispered rumours, but it is worth taking them into account now as many will affect small businesses. Particularly small businesses based in Stockport, South Manchester and Cheshire.
Here are our four predictions for the coming budget that we think could have a marked effect on your business.
1. Tax Free Dividends Reduction to £2000
The £5,000 annual tax-free dividend allowance was introduced by George Osborne. It seems likely that Mr Hammond will whittle it down to just £2,000.
This would come into effect from April 2018, which means that, provided your company has sufficient distributable profits, directors should consider accelerating dividend payments to before 6 April 2018 to benefit from the current dividend tax-free allowance before it drops.
There are various drawing strategies available for extracting money from a company. We’d be happy to discuss these with you should you have any concenrs.
2. Tax Relief on Pension Contributions to be Restricted
Many believe that Philip Hammond will return to pension reforms in the next budget – particularly as pension tax relief cost the Exchequer £38.2bn last year.
It would probably also appeal to the Treasury, because it’s estimated that higher rate taxpayers account for half of all pension contributions, but nearly three quarters of all tax relief.
There is no certainty that any change will be announced in November, and even if it is, whether it will take immediate effect. However, if you are contemplating a pension contribution in the near future, it is worth bearing in mind and topping up before the budget or end of tax year.
3. Making Tax Digital
Perpetually delayed, Making Tax Digital is going to come in. Quite when, might be a topic within Mr Hammond’s Budget Speech.
The government has already invested heavily in Making Tax Digital. So it is more a matter of when, than if. When fully implemented, there is no doubt that it will affect numerous small business in Stockport and Cheshire.
Paper based accounting will be a thing of the past which means that it’s more important than ever to move tosystem. For more information and support talk to us about this important change.
4. Tax Rate to Remain Static
It seems likely that tax rates will remain the same. It’s not in the political interest of the government to raise taxes with Brexit uncertainty and a rejuvenated opposition. However, it would be no surprise at all to see the dividend rate goes up from 7.5% to 10%. The Government is desperate for cash, so there will be no giveaways!
Autumn Budget 2017
As always, we’ll be following the events of the budget to see if our predictions are on point, and highlighting any issues arising from the announcements that might affect Stockport small businesses, business owners, freelancers, contractors etc.
Do get in contact if any of these predictions affect you or you need advice.