We’ve all had time to digest what Wednesday’s budget means for our household finances, but have you considered how it might affect your business?
Many of our clients are individual practitioners or run small clinics. There was much in the budget of note for small businesses like these. We’ve picked out the main ways that Wednesday’s budget will affect small and medium-sized clinics:
1) If you employ staff, the National Living Wage will have an impact on costs. From April 2016, the government is introducing a new minimum wage of £7.20, which will rise to £9 by 2020.
2) A 50% increase in the national insurance employment allowance from £2,000 to £3,000 will help small business owners to cut their wage bill and will slightly offset the cost of the Living Wage.
3) For limited companies, the rate of corporation tax will fall to 19% in 2017 and 18% in 2020. This will make the UK’s rate the lowest in the G20. However, if you’re a sole trader or only generate a marginal profit, this is unlikely to have a big impact.
4) From April 2016, the Dividend Tax Credit will be replaced with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers. This may result in some business owners paying less tax, but top-rate tax payers will find that the top rate of tax on dividend income will rise from just over 30% to 38%.
5) The annual investment allowance for businesses will go up to £200,000 this year. The aim is to encourage investment in equipment. It was due to fall to £25,000 at the end of the year.
6) The Office for Tax Simplification has been given the go ahead to further slash red tape and will now put forward its recommendations for a reformed tax system. Most tax returns are already done online and further digitisation of tax reporting is likely in coming years.
We’d love your opinions on the budget and how you think it will affect your clinic.