Following the last ever Spring budget, Phillip Hammond announced that Class 4 NICs (paid by the self-employed) were set to increase from 9% to 10% in April 2018, and to 11% in 2019. This along with other measures was seen as an attack on the self-employed; it was also viewed by many as breaking a manifesto promise made by David Cameron during the 2015 election not to increase national insurance. The planned increase has now been scrapped.
In a Commons statement, the chancellor told MPs: “There will be no increases in National Insurance rates in this Parliament.”
From 6th April 2017
Class 4 NICs for the self-employed will remain at 9% on profits between £8,164 and £45,000 (£8,060 and £43,000 for 2016/17).
Class 2 NICs will be payable at a rate of £2.85 (£2.80 for 2016/17) by the self-employed on profits over £6,025 (£5,965 for 2016/17).
Class 2 NICs are due to be abolished from April 2018.
From 6th April 2017 the personal allowance will rise to £11,500 an increase of £500.This means an individual can now earn £11,500 before they pay tax.
Higher Rate tax threshold
The higher rate tax band increase £2,000 to £45,000 unless you are a resident Scottish tax payer in which case it will remain at £43,000.
The corporation tax rate reduces to 19% from 1 April 2017.
The dividend allowance for 2017/18 remains unchanged at £5,000; this means you can receive £5,000 of dividends tax free. The chancellor announced that this will reduce to £2,000 from 1 April 2018. This will affect the optimum level of dividends that directors take from their limited companies.
The VAT threshold has increased by £2,000 to £85,000.
Flat Rate Scheme
There is a new category of trader called a ‘limited cost company’ with a flat rate scheme percentage of 16.5%. Many companies currently benefiting from the flat rate scheme will see the VAT they pay rise; it may well be more beneficial to leave the flat rate scheme and move to standard rate VAT.
More on this in my next blog!