July 9, 2015 On 8th July 2015 George Osborne delivered his seventh Budget as chancellor and the first one for a majority Conservative government for 19 years. Our clients are mainly modern small businesses, freelancers and contractors so we have outlined the key points from the budget that affect them and there are quite a few changes to digest. There are many other changes but we have focussed on the most important ones for our core client base. The full summer budget PDF document can be downloaded here if you wish to get stuck into the detail. None of these changes affect the current tax year and only come in from April 2016 and beyond. Also they are not set in stone yet, they could be tweaked and amended before being finalised. Full details of the changes are still to be confirmed so this is very much an initial overview and we will be offering further advice in due course. Corporation tax – for those operating from limited companies the good news is that corporation tax is set to drop from 20% to 19% in 2017 and 18% in 2020. Employment allowance – this relatively new scheme that allows employers to claim some of their employers national insurance gets a boost and will be increased from £2,000 to £3,000 from April 2016. See here for how this scheme works currently. However HMRC are changing the rules and they are now saying that from April 2016 companies where the director is the only employee will not be able to claim the employment allowance. What is not clear at this stage is if there are only two directors i.e. a husband and wife, if they will be able to claim it. Income tax – there are increases to both the personal allowance and higher tax band. The personal allowance will increase from £10,600 to £11,000 in April 2016 and the point at which people start paying income tax at the higher rate of 40% will rise to £43,000 next year. Dividends – perhaps one of the biggest changes is that from April 2016 HMRC will be scrapping the notional dividend tax credit and replacing it with a dividend tax. This will largely mean increased personal tax on those taking dividends – we have outlined these changes on a separate post here. This is a major overhaul of the dividend system but as with all of these budget points, full details are still to emerge so these are just our initial thoughts. Annual Investment Allowance – for firms that invest in a lot of equipment and assets the annual investment allowance has been a real help and this is to be set at £200,000 from Jan 2016. Property income – it is bad news for buy to let landlords as their tax relief on mortgage interest costs will be limited to the lower rate of 20% tax. However home owners with lodgers will be able to earn £7,500 tax-free from their house-guests each year (was £4,250).