The recent budget has had some big controversial headline changes: taxes on sugary drinks, more academies, longer school days and primary school sports. Quite often the things which impact on small to medium sized businesses are hidden away in the small print, so we are usually busy after the budget finding out what these proposals are and what their impact will be. So here are a few mixed morsels for you, in no particular order.
LOANS TO PARTICIPATORS
Sounds innocuous and not relevant to you? Think again. Many small to medium sized businesses are run by 5 or fewer shareholders. These are the “participators” in question. (You just didn’t see that coming, did you?) Now that dividends are being taxed as of April 2016 (in case you had forgotten), some businesses have been looking at making loans to participators/directors as a way of getting money out of the business – possibly with a view to the loans never really being paid back. As of April 2016, these loans will now be taxed (on the company) at 32.5% instead of 25% so that loans do not look like a preferable option. Thought the tax on dividends hit small businesses by accident? It is now looking like a definite plan. They think they will raise £15-£80 million per annum from it.
If you like this sort of thing, more details here: https://www.gov.uk/government/publications/corporation-tax-rate-of-tax-for-the-loans-to-participators-charge/corporation-tax-rate-of-tax-for-the-loans-to-participators-charge
INCOME TAX – 40% HIGHER RATE THRESHOLD
Another dull sounding title with a veritable can of worms behind it. In the 2016/17 tax year, people start paying tax at 40p in the £1 when they start earning over £43,000 (this includes the effect of a basic personal allowance of £11,000 too). This is due to rise in 2017/18. Happiness all round for the people in that zone. However. The SNP have said that if elected they would not intend to pass on the increases in the rates in Scotland when their tax powers come into force. Which hasn’t happened yet, so it is theoretical. And it works out to about £120 a year difference. So make your own mind up about that one.
TRADING INCOME RECEIVED IN NON MONETARY FORM
So you do your friend’s books, and she does your eyelash extensions in exchange. No tax implications there right? Of course there are. Both transactions should be taxable at ‘money’s worth’ or market value. Don’t say we didn’t tell you! This has always been the case, but it has been challenged, so this little bit of legislation is just making it cast iron. You need to declare those in kind transactions…
If you have a long train journey ahead, or like to be informed, there is a summary of some budget measures are here (quite a bit of the small print missing): https://www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced.
Or if you like small print, the full version is here: https://www.gov.uk/government/publications/budget-2016-documents.
Wishing you a higher rate sort of week