The new tax year will start from the 6th April 2017, so now is the time to start considering how any upcoming changes in tax rates and rules will impact you.
Income Tax Rates
In 2017/18 the personal allowance will increase to £11,500 (£11,000 in 2016/17), this is the amount that individuals can earn without paying any tax. The basic rate band will also increase to £45,000 (£43,000 in 2016/17) meaning more can be earned before you would enter the higher rate tax bracket.
For most contractors this will mean they will be able to draw more from the company by way of salary and dividends before being subject to the higher rate of tax.
The rate at which Corporation Tax will be calculated will reduce to 19% of applicable profits from the 1st of April 2017. Currently the corporation tax rate for small companies is 20%.
This reduction means all companies will see an increase in the available profit that can be distributed as a dividend to the shareholders.
Flat Rate VAT
As announced by the government at the Autumn Statement a new 16.5% VAT rate will be introduced, this rate will be for businesses with limited costs.
This change may mean the flat rate scheme may not be the best option going forwards for some contractors and they may choose to operate under the standard rate scheme instead.
Prior to the start of the new tax year your dedicated accounts team will contact you to discuss what the changes mean for you and to provide further advice and guidance.