Recent updates were announced in the UK Summer Budget 2015 on July 8 that will affect businesses in the UK. As Staffordshire’s leading tax specialists, we put together this post as a guide for companies to keep track of the budget changes, and the impact they will have on businesses, particularly SMEs and limited companies.
1) The new Corporation Tax rate
One of the major changes is the introduction of a single Corporate Tax rate, which stands at 20%. Previously there were two different tax rates:
i) the main rate for large businesses, and
ii) the small profits rate for small businesses.
In between these two rates was a strange calculation to claim marginal rate relief. However, as of 1 April 2015 – no joke! – these were replaced with a new single Corporation Tax rate at 20%.
2) Reduction in Corporation Tax
In addition to the introduction of a single Corporation Tax rate, it was announced that this rate will gradually be reduced even further:
- · to 19% in April 2017, and
- · to 18% in April 2020.
3) Setting the Annual Investment Allowance
The Annual Investment Allowance (AIA) is a type of capital tax allowance that offers 100% tax relief on the cost of fixed assets (e.g. equipment, machinery) in the year that they are purchased. The AIA was introduced in 2008 to help small businesses make large investments and increase productivity.
The current limit on the allowance is £500,000 and was expected to plummet to £25,000 in 2016. However, the Chancellor revealed that the AIA will be permanently set at £200,000 from 1 January 2016. This relief is available to both incorporated and unincorporated businesses.
Note: Watch out if you own more than one business; they may need to share the allowance!
4) Increase in Employment Allowance
Every year, employers are able to reduce the amount of National Insurance contributions (NICs) that they pay for their employees. This is currently £2,000 per year, but will increase to £3,000 from April 2016. This is available to most employers, whether they are limited companies, sole traders, partnerships or charities.
Note: Check for restrictions with the Employment Allowance, including one targeted at director-only payrolls!
5) Changes in dividend tax
Another big change announced in the UK Summer Budget 2015 is the taxation of dividends. If you are a director of a company, or are in receipt of dividend income, keep an eye out for our next post on the changes in dividend tax, where we will be reviewing the changes in this area and how they affect you.
Got a question?
If you would like more information on these changes or need any friendly tax advice, please get in touch with us on 01782 479 699. You could also have a chat with us to find out how we can help your business. The team at Premier Tax Solutions is always happy to help.