Summer Budget Summary

9th July 2015

Summer Budget Summary


The big news for business coming out of the Summer Budget was the increase in the minimum wage to a “living wage” level of £9 per hour over the next 5 years, leaving employers in many sectors wondering how they are going to fund this increase, which is effectively the Chancellor’s way of transferring responsibility for the lower paid sector from the welfare budget. 

But there is more bad news for many small business owners which has received little publicity – the addition of an extra 7.5% income tax on dividends from April 2016 will hit straight at the pockets of the mass of owner managers who operate their businesses through limited companies. The reduction of corporation tax from 20% to 18% over the next 5 years and the exemption for the first £5,000 of dividends will be of little comfort to these entrepreneurs – for example a husband and wife team who typically draw dividends of £30,000 each from their business will face an income tax bill of £3,750 per annum between them where they previously paid no income tax at all. Consideration will need to be given early in the new year to advancing dividend payments so that they fall within the current tax regime. 

On the plus side, the limit for up front tax relief on capital expenditure, which was due to be reduced from an annual £500,000 to £25,000 from 2016 has been set “permanently” at £200,000, and the employers’ national insurance “sweetener” (aka the employment allowance) which has been £2,000 since it was introduced for 2014/15 will be increased to £3,000 from 2016/17. 

Overall though, a rather depressing picture for the typical SME owner. 

Written by Peter Hedgethorne, Director at Plus Accounting, Chartered Accountants



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