Are Tax Changes Getting Your Business Down?
It has recently been reported that almost 70% of small business owners feel that recent and upcoming changes in tax are going to have a negative impact on their businesses. When we look at what changes have happened or are planned to take place in the near future, it’s not difficult to see why business owners may feel this way. Below we take a look at what tax changes are taking place and how it could affect you.
Making Tax Digital
By now you will have heard all about the upcoming changes to the digitalisation of tax. This change has been on its way for a while and many business owners are concerned about the burden it will put on businesses. There have been many delays on the implementation of MTD, the most recent being that only MTD for VAT will be operational by April 2019 rather than tax returns which have been delayed until April 2020. The government has launched a pilot scheme for businesses to sign up to which may benefit business in their preparations and help to familiarise business owners with the new system before it becomes compulsory.
IR35
Introduced in 2000, IR35 was implemented to tackle tax avoidance by establishing whether self-employed workers should be classed as employees for the purpose of paying tax. The government plans to reform IR35 which could shift the burden of determining employment status from the worker to the hirer or client. There are concerns regarding how this will work within the private sector and it is not yet clear whether these will be addressed before the legislation is published.
Dividend Allowance
Introduced this year one of the biggest changes was cuts to the dividend allowance. Previously if you paid yourself a dividend through your company you were able to claim £5000 tax free. This has now been lowered to £2000, meaning you will need to pay tax on £3000 more than you did before. This could massively affect your profits depending on which tax bracket you fall into.
Employee Costs
As a business with employees you will be aware of a couple of recent changes which could affect your profits. The first of these was the increase of the National Living Wage which was raised from £7.50 per hour to £7.83. Also changed this year was the amount employers are obligated to contribute towards employee pensions. Employers must now pay in a 2% contribution, up from 1% last year. This is due to rise again in 2019 to 3%.
It is clear that many businesses are feeling the strain from all these changes, however there are many ways in which your business could benefit from tax reliefs. There are a wide variety of tax reliefs available to businesses, some of which are not widely known or often used. We always try to advise when businesses can best take advantage of these but if you would like to discuss your business and find out if you’re missing out on any reliefs then please get in touch with us.