Editor | 7 April 2017
Tax changes for small businesses and freelancers

Tax changes for small businesses and freelancers

Tax changes for small businesses and freelancers 

The new tax year has brought a fresh wave of tax bracket and regulatory changes that many small businesses and freelancers will need to adapt to. 

Some of the changes will have a positive impact and some will be more negative. 

We have summarised the most important changes and detailed who they are likely to affect.

Corporation tax cut

Corporation tax is the tax paid on limited company profits each year – it is payable within 9 months of the company’s year end.

Who it will affect:

  • Small businesses
  • Freelancers operating through a limited company

Some welcome news to start off with; corporation tax fell from 20% to 19% on April 1. It will fall even further soon before it gets to 17% in 2020.

Changes to the VAT flat-rate scheme (FRS)

Who it will affect:

  • Mainly service providing businesses and freelancers

Changes to the FRS com into effect at the start of April. It will mean that certain ‘limited cost’ traders who currently use the flat-rate scheme will see their rate increase to 16.5%

‘Limited cost’ traders spend less than 2% of its money on certain goods during an accounting period.

Public sector IR35 changes

Who it will affect:

  • Limited company contractors in the public sector

From April 6, limited company contractors working in the public sector will be classed as inside IR35 by default and must have PAYE deducted from the payments made into their Limited Company

This will result in many more contractors falling inside IR35 and facing a take home pay cut of up to 20%.

New tax bands

Who it will affect:

  • Everyone!

From April 6, new tax bands take effect meaning we can all earn more before moving onto higher rates of tax.

The standard Personal Allowance increased from £11,000 to £11,500,

The Basic Rate band rose from £32,000 to £33,500 and the Higher Rate band went from £43,000 to £45,000.

National Living Wage increased

Who it will affect:

  • Employers paying National Living Wage.

 The National Living Wage increased from £7.20 to £7.50 on 1 April. This is only for National Living Wage workers aged 25 and over. 

For  more information please visit www.cloudaccountant.co.uk or email team@cloudaccountant.co.uk