As with every Budget, there will be winners and losers but, with tax and regulatory changes on so many different levels, this one-off Summer Budget (delivered on 8 July) is guaranteed to affect every business.
There are some clear tax savings for SMEs but the changes to dividend tax and the new national living wage are just two elements that will require careful planning.
One of the biggest headlines came from the announcement that corporation tax will ultimately be cut to 18% by 2020. And, for businesses with profits in excess of £20m, the corporation tax payment date will be brought forward so you will pay your tax closer to the period in which the profits were earned.
The AIA is a valuable tax break that allows businesses to claim 100% relief up to the annual limit. The issue has been that the AIA limit has changed on an almost annual basis, and was set to drop to just £25,000 at the end of 2015. The Chancellor's announcement that the AIA will be fixed at £200,000 'for the foreseeable future' will help businesses to plan with more certainty their capital expenditure.
We expect this to be of particular benefit to Clayton & Brewill’s manufacturing and agriculture sector clients. For help with planning your capital expenditure, please contact Doug Perry.
The dividend tax credit is to be replaced with a new tax-free allowance of £5,000 of dividend income for all taxpayers. Above this £5k allowance though, the change will mean a 7.5% rise in tax for basic rate taxpayers and a 32.5% increase for higher rate tax payers. Dividends paid within pensions and ISAs will remain tax-free and unaffected by the changes.
This change seemed to be somewhat ‘smuggled through’. To find out how you will be affected by this change, please contact Clayton & Brewill’s Jack Moore.
Whilst it is largely a 'Budget for business', there is one group of small businesses that will lose out – and these are the buy-to-let landlords. Tax relief on mortgage interest payments will be cut to the basic rate of tax – ie: 20%.
We expect this to have quite an impact on many small buy-to-let landlords. To find out how it might affect your buy-to-let business, please contact Clayton & Brewill’s Dan Burnell.
The Chancellor surprised many with his pledge that a new national living wage of £7.20 per hour would be introduced for the over 25's from April 2015, rising to more than £9 by 2020. Retailers and other businesses with a large number of lower paid workers on their payroll will need to plan for these increases to their staff costs, which will also be hit by the new workplace pension costs.
For help with understanding your potential payroll costs, please contact Julie Braithwaite.
The rise in the inheritance tax threshold from £650,000 to £1 million for married couples passing on the family home was confirmed. This change effectively means means that couples will be able to pass on a tax-free £350,000 home allowance to their beneficiaries.
There was much in the Summer Budget for SMEs to ‘get their heads around’ but we will be doing our best to help you understand the key elements over the course of the next few weeks.