Pro Installer August 2015 - Issue 29 | Page 60

60 AUGUST 2015 PRO INSTALLER PRO BUSINESS www.proinstaller.co.uk Summer Budget 2015: What’s in store for Small Businesses? The Winners and the Losers As we Brits know only too well, summer time can be a tale of two halves. It can bring glorious hot days, trips to the beach and barbecues. But it can also mean sun burn, invasions of insects and thundery downpours. And that’s exactly how the story went for small business owners in July’s emergency Summer Budget. Chancellor George Osborne set out the first all-Conservative budget for nearly 20 years, and he stuck steadfast to his austerity measures. As we’ve seen since the recession in Budgets and Autumn Statements, for every tax break; there would be a tax rise elsewhere to compensate. There are no unfunded giveaways. The big headlines for our small businesses and taxpayer clients were the overhaul of the tax treatment on dividends and the changes to tax reliefs available to landlords. Thundery Showers over Companies Sunshine Companies have probably been the biggest losers from the Summer Budget. Although they will benefit from the corporation tax cut, the Dividend Tax Allowance will likely leave many director-shareholders out of pocket. The withdrawal of tax relief on goodwill will also be a sorely missed perk of going limited. Combine this with what happened in Autumn Statement 2014, when we saw the withdrawal of Entrepreneur’s Relief on goodwill transferred to a limited company and it’s quite clear that the government are keen to reduce the benefits of being a limited company. SMALL BUSINESSES Here, in the adjacent table, we’ve summarised the winners and losers of the emergency Summer Budget 2015: Corporation tax cut - Corporation tax will fall further from 20% to 19% in 2017, and then to 18% in 2020; benefiting over a million businesses. Unfortunately, the rate of corporation tax for small and large businesses will remain unified under current plans.  Fuel Duty - The Chancellor also confirmed that there would be no change to the plans he set out for fuel duty in the Coalition’s last Budget in March 2015. Fuel duty will therefore remain frozen this year. Showers Dividend tax treatment overhaul - From April 2016 the dividend tax credit will be abolished and replaced with a £5,000 Dividend Tax Allowance. This will mean that the first £5,000 of dividends received will be tax free, and then anything above this will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Corporation tax relief on goodwill - Tax relief is no longer available for goodwill purchased on or after 8th July 2015. Annual Investment Allowance (AIA) - This was planned to fall to just £25,000 from 1st January 2016. But the Summer Budget announced it would instead fall to just £200,000.  EMPLOYERS Employment Allowance - In order to ease the burden of the National Living Wage, the government will raise the Employment Allowance from £2,000 to £3,000 a year from April 2016.    National Living Wage - From April 2016, a new National Living Wage of £7.20 an hour for the over 25s will be introduced. This will rise to over £9 an hour by 2020. Whilst this will be welcome news to employees, this could hit small businesses hard.  Director-only companies and the Employment Allowance - To ensure that the NICs Employment Allowance is focused on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance. PERSONAL Tax lock - In their manifesto, the Conservatives vowed there would be no rate rises to tax, National Insurance or VAT for the duration of Parliament. Personal allowance - Will increase from £10,600 this year to £11,000 next year.  Higher rate threshold - Will increase from £42,385 this year to £43,000 next year.  Pensions Annual Allowance - For every £2 of adjusted income over £150,000, an individual’s Annual Allowance, will be reduced by £1, down to a minimum of £10,000.       Inheritance tax - The government will take the family home out of inheritance tax for all but the wealthiest with a new transferable nil-rate band, introduced from April 2017. This will apply when a main residence is passed on death to direct descendants, such as a child or grandchild.  Pick up the PRO Installer, FREE, from one of over 600 trade counters.