There was bad news for small businesses after the Chancellor presented his spring budget on March 8th, tax rises for the self employed and cuts in dividend allowances mean higher tax burdens.
Phillip Hammond announced that Class 4 National Insurance Contributions (NICs) would be increasing from 9% to 10% from 6 April 2018 and then to 11% from 6 April 2019. His justifcation is that the self-employed are now entitled to more generour state benefits than in the past and thus NIC rate should be increased towards the 12% Class 1 NIC employee rate. Note that the flat rate Class 2 NIC contributions, currently £2.80 per week, cease on 5 April 2018.
The Chancellor also announced a cut in the dividend allowance from £5,000 to £2,000 in a bid to try to limit the rise in tax-driven incorporation.
Other significant announcements included the deferral of the start date of Making Tax Digital by one year to 2019 for self employed businesses and property landlords with turnover below the VAT registration limit.
There was also confirmation that the planned reduction in Corporation Tax to 19% from 1 April 2017 and then to 17% by 2020 will go ahead.
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