With the Conservative Party’s election victory in December, businesses now have a clearer idea of what tax changes they can expect to see introduced in April, and subsequently over the life of the new parliament.
Directors and the self-employed can take comfort in the promise not to raise rates of income tax and national insurance contributions (NICs), although their value will be less reassuring if tax thresholds are not increased in line with inflation. There is also going to be no increase in VAT rates.
The level at which NICs start to be paid will be raised from £8,632 to £9,500 from April 2020, with a possible increase to £12,500 by the end of a normal five-year parliament.
There will be a one-year NICs holiday if you hire someone after they have left the armed forces. A further measure will see the employment allowance increased from £3,000 to £4,000.
Companies and business property
Unsurprisingly the previously announced cut in the rate of corporation tax to 17% has been cancelled, with the rate remaining at 19%.
The tax credit for research and development (R&D) expenditure for large companies is going to go up from 12% to 13%, with the definition of R&D reviewed to include investment in cloud computing and data.
Brick and mortar businesses continue to face challenges:
- Business rates will be reduced, with the government carrying out a fundamental review of the system. The first step will see a further reduction to business rates for retail businesses. A one-third retail discount has already been introduced for 2019/20 and 2020/21.
- The rate of structures and buildings allowance will be increased from 2% to 3%. This is not as generous as it might seem, because the allowance is only available for properties constructed since 29 October 2018.
Entrepreneurs will be pleased that both the Enterprise Investment Scheme and Seed Enterprise Investment Scheme will continue throughout the new parliament, but a proposed “review and reform” of entrepreneurs’ relief has potentially ominous implications.
BGM will provide an update after the Budget in March.