Summer Budget 2015: Key points for businesses

Summer Budget 2015George Osborne delivered his summer budget speech this week. If you’re a small business in Essex, here is a summary of how it could affect you:

Corporation tax

The Chancellor has promised to cut corporation tax by 19% in 2017 and 18% by 2020.

Employment Allowance

National Insurance employment allowance for small firms is to be increased by 50% to £3,000 from 2016.

 National Living Wage

A new national living wage will be introduced for all workers aged over 25 starting at £7.20 an hour from April 2016, raising to £9 by 2020.

Dividends

The Chancellor set out plans to reform the taxation of dividends by replacing the dividend tax credit with a new tax-free allowance of £5,000 on dividend income. The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%, equivalent to an increase of 7.5% where dividend income exceeds £5,000.

According to the Chancellor:

“Those who either pay themselves in dividends or have large shareholdings worth typically over £140,000 will pay more tax; 85% of those who receive dividends will see no change or be better off.”

Personal taxation

Personal allowance, the point at which people start paying tax, is to raise to £11,000 next year. The government says the personal allowance will raise to £12,500 by 2020, so that people working 30 hours a week on the minimum wage will not pay income tax.

Additionally, the point at which people start paying income tax at the 40p rate is to rise from £42,385 to £43,000 next year.

Rental property income

  • The amount of the rent a room relief will rise from £4,250 to £7,500 from April 2016. Small B&B establishments will also benefit as they can claim the relief too, provided the owners live on the premises.
  • From April 2016 wear and tear allowance will end to be replaced by a deduction for landlords when they actually spend the money. It remains to be seen whether the deduction for money spent will apply to all expenditure, including that on kitchen appliances such as ovens, and whether it will be subject to a “cap”.
  • From April 2017, tax relief on interest in property businesses (including single buy to lets) will be restricted so that by 2020, interest will not be an allowable expense in computing the profits of the business, but will attract tax relief at 20%.

Tax avoidance

£7.2bn to be raised from clampdown on tax avoidance and tax evasion with HMRC budget increased by £750m

Annual investment allowance

Annual investment allowance will be fixed permanently at £200,000 from January 2016

Help for Essex businesses

If you are you a business in or around the Chelmsford or Brentwood areas and aren’t sure how these new measures will affect you, why not get in touch. Nine Ashes Bookkeeping can help you with a wide range of services including tax advice, bookkeeping, payroll and year end accounts production. We’ll make sure your business only pays the tax it has to and takes full advantage of the tax relief and incentives available for small businesses.

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