This week’s Queen’s Speech was a comparatively sedate affair, but there were some intersting points for small business owners.
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The Financial Bill proposed by the last parliament was paused once the election was announced. This week the Queen suggested it would make a reappearance during this Parliament – and the implications for small business owners could be significant.
What happened to the Finance Bill?
The Finance Bill 2017 was intended to complete the measures included in the March Budget. However, when the government called the election, it was thought that there was not enough time to get the Bill through Parliament before MPs set off campaigning.
Now, however, the Finance Bills (there are, confusingly, now three of them) are back, as announced in this week’s Queen’s Speech.
What’s in it?
There remains confusion about what the Finance Bills actually mean. Chartered Institute of Taxation policy director John Cullinane told CCH Daily: “The government have confirmed they will be introducing a summer Finance Bill but said little about what it will contain. There remains a need for an urgent statement to clarify the government’s intention on the proposals dropped from the pre-election Finance Bill.”
But we do know a few things, thanks to the Queen. First, there will be a series of measures to tackle tax avoidance, although it is not specified what these will be or who they will target.
Next, there will be a Bill to “ratify several minor EU agreements.” Finally, there will be further legislation relating to the UK’s exit from the EU.
However, there is still no clarification on the major points that affect the self-employed. Primary amongst these is Making Tax Digital.
This raft of changes has major implications for the ways in which small business owners and landlords file their tax returns. The most controversial provision of the scheme was the introduction of new quarterly tax returns. Business groups have said that such a regime would be a major cost and time burden for small firms, but HMRC maintains that it is necessary to bring costs down, and will have a limited impact on all but the biggest companies.
Similarly, we don’t yet know what’s happening to dividend allowances. Many small business owners pay themselves a nominal salary, and then take money out of their limited company through share dividends for tax purposes.
Up until this point, shareholders could take up to £5,000 out of their businesses in this way, free of tax. However, in the Budget it was announced that this would be cut to just £2,000, all but scrapping the relief. It’s not clear whether this will remain in the revamped Bill.
One thing that’s very unlikely to return, however, is the government’s widely criticised changes to National Insurance Contributions for the self-employed. Their increase to the Class 4 rate met with a significant backlash from business groups and the press, and led to a major u-turn.
There is expected to be a Bill on NICs in this Parliament, but the Queen’s Speech said it “does not relate to the discussion of Class 4 contributions at the time of the Spring Budget 2017.”
What happens now?
First, it’s important to remember that as we no longer have a majority government, it may be a much more difficult process for parliament to get laws passed.
However, it is thought that the provisions of the latest Finance Bill have broad cross-party support, and accountants and other finance professionals expect the Bill to pass at some point early in this Parliament.
What do you make of the proposed changes? Let us know in the comments.
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