Changes from the Chancellor

After the July Budget we sift through some of the headline announcements. 

It is, of course, human nature.

Every time the Budget ticks around, we try to work out whether we are better off as a result, or whether we feel as if we’ve been kicked to the curb once again. 

The recent ‘Stability Budget’, delivered on 8th July, was no different, with some potentially major changes being introduced. Post-election, it wasn’t the time for the crowd-pleasing penny-off-the- price-of-a-pint to appease the red-tops. Instead, the Chancellor has given businesses right around the UK something to think about.

The biggest headline grabber was the future cuts in the rate of Corporation Tax. A limited company’s taxable profit will be taxed at 19% for the financial years beginning 1st April 2017, 1st April 2018 and 1st April 2019, and then at 18% for the year beginning 1st April 2020. The 2% reduction is, in real terms, a £1,000 reduction in the tax liability per £50,000 of taxable profit.

Although the figures may not seem ground breaking, they need to be viewed in conjunction with further changes that were announced. The success of Annual Investment Allowance since its introduction back in 2008, has led to its further extension. With the limit having been due to drop to £25,000 from the current £500,000 at which it is set, many welcomed the news that the figure will now, in fact, be £200,000 with effect from 1st January 2016. This means that the first £200,000 (barring transition rules) that a company spends on capital items can be deducted in full against their taxable profits.

One final piece of good news for companies, and employers in general, was the extension of the Employment Allowance, which is now in its second year. The Chancellor announced that from April 2016, it will be increased to £3,000 from the current £2,000 level. This means that an employer can save £3,000 from their National Insurance bill in a tax year. The criteria have been tightened to allow for the increase though, with schemes where a company director is the sole employee no longer being eligible.

More than ever, it’s now a time for business owners to be looking into the changes that are afoot, deciding on the possible ramifications and trying to take full advantage of any opportunities arising as a result. If you are unsure of how the changes might impact your business, take the time to give your accountant a call. They would love to discuss possible growth opportunities with you.