National Insurance

National Insurance Class 2 will be removed from April  2015.  At the same time, there will be an increase in Class 4  National Insurance of 1%. There will be a further 1% increase in 2019/20.

The increase relates to profits falling between the “Lower Profits Limit” and the “Upper Profits Limit”.   The increase is therefore, capped for people with profits of £45,000 and above.

Dividend Allowance

Dividends are a distribution of a company’s profits, which have already been taxed through Corporation Tax.  Dividends are subject to a further tax, through income tax, paid by the recipient.

In 2016/17 the rate of income tax payable resulting from receipt of dividends was increased from:

• 0% to 7.5% for basic rate taxpayers

• 0% to 32.5% for higher rate taxpayers

• 0% to 38.1% for additional rate taxpayers

 A £5,000  dividend allowance was introduced at the same time.

In April 2018 the allowance will be reduced to £2,000 and this will result in a tax increase of £225, for a basic tax payer who receives dividends of £5000.

Making Tax Digital (MTD)

For information regarding MTD, please see the link below:

https://www.gov.uk/government/news/next-steps-on-the-finance-bill-and-making-tax-digital#history

 Autumn Statement Changes to the VAT Flat Rate Scheme

The VAT Flat Rate Scheme is a simplification measure for businesses with an annual turnover of less than £150,000.   Businesses, that comply with the scheme criteria, can apply to join the scheme.    The business raises VAT invoices to customers and accounts for VAT at a flat rate percentage of turnover. The rate calculated, which includes an adjustment for input tax, is dependent on the sector that the business operates in. 

The benefit of the scheme is that it is very simple to operate and can reduce the burden of VAT returns.  You must leave the scheme if, on the anniversary of joining, your turnover in the last 12 months was more than £230,000 (including VAT) – or you expect it to be in the next 12 months.

The statement announced that, with effect from 1 April 2017, any business currently using the scheme, or businesses joining the scheme, will have to decide if it is a limited cost trader.  Such businesses will have to use a flat rate percentage of 16% and not the sector rate.