Our expert’s reaction to the summer budget

Michael B. Bennett has helped over 800 therapists to manage their accounts. He has specialised knowledge of the industry. Here’s his view on the Government’s summer budget.
In my view this was not a very nice budget. It sounded good in terms of increasing minimum wages and decreasing corporation tax, as well as raising tax thresholds, but at the end of the day, it has done very little that the self-employed or small company owner could be happy with.
The top end of the 20% tax band goes up by £215 in 2016/17 (a saving of £43 a year) and a further £400 in 2017/18 (saving another £80). Further up the scale the top end of the 40% band does not change.
Personal allowances increase by £400 in 2016/17 (saving £80) and only by £200 the following year (saving £40). So if your income is just about using up the basic rate band as a sole trader, by 2017/18 you will be roughly £240 better off – this equates to around £5 per week.
Those running through small companies will get a tax cut of 1% in 2017/18 and a further 1% in 2020/21. On the other hand, from 2016/17 your dividends over £5,000 will be taxed. If we take a fairly modest example of someone who is trading through a company making £45,000 profit and taking everything they can out as dividend.
For 2015/16 the tax payable would be £7,486. For 2016/17 it goes up to £9,282.
Now let’s add in the new minimum wage, or living wage, effect. Currently the minimum wage is £6.70 per hour. This goes up to £7.20 from April 2016 and will gradually increase to £9 by 2020. This is an increase of 7.5% on wage costs for people paying at the minimum rate. So wage costs go up, as do NI costs, and in line with them so do both employer and employee pension contributions under the workplace pension regulations.
Thus for small businesses there is a squeeze at both ends and a need to tighten belts once again.
And then to add insult to injury, for those “sole traders” running through a company, the Employers Allowance, which is being increased from £2,000 to £3,000 next year, will no longer be available to businesses with only 1 director and no other employees.
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