Business owners reckon that tax changes will impact them more than economic upheaval in 2017, as small businesses ready themselves for April’s flat-rate VAT hike.
In a recent Simply Business poll, 54 per cent of 500 respondents said that changes to the tax system will hit them hardest this year.
Meanwhile, 28 per cent said that large-scale economic changes will have the greatest effect.
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Government incentive changes only received 11 per cent of the vote, and just seven per cent of businesses reckon that technology changes will have the biggest impact.
2017 business tax changes
So what are the tax changes that will come into effect into 2017?
- As of April 2017, the rate of corporation tax will be cut from 20 per cent to 19 per cent.
- The personal allowance for income tax (the amount you can earn before you owe tax) will rise to £11,500 for 2017-18.
- The higher rate income tax threshold will rise to £45,000 for 2017-18.
Flat-rate VAT change
But one of the biggest changes is a rise in the amount of VAT that many small businesses will have to pay.
The flat-rate VAT scheme was introduced ten years ago, so that small businesses could pay a standard rate rather than make complex calculations. The flat rates depended on the type of business, with farmers paying as little as 6.5 per cent, and other firms paying a standard rate of 14.5 per cent. But the government believes that businesses are abusing this scheme, so it has changed how it works.
As of April this year, the flat rate will go up to 16.5 per cent across the board for ‘limited cost traders’ - businesses that only spend a small amount of their turnover on goods. This is mainly businesses that sell a service rather than products, for example hairdressers, IT contractors, accountants, and photographers. You have to meet specific criteria to qualify as a limited cost trader - there’s more information in this government guidance note.
Critics believe that the changes will leave small businesses and self-employed workers out of pocket.
In another Simply Business poll, 87 per cent of voters said that the changes to the flat-rate VAT scheme were unfair.
Will you be impacted by 2017 tax changes? Tell us in the comments.