Here’s the 5 things you need to know about the 2015 budget (if you are a small business)…

Author: Russell Smith
July 8, 2015

The budget was predictably huge yesterday, but not just politically – there was plenty in there for small business.  Here are the 5 most important points:

1. Corporation tax being cut to 18%.

The corporation tax rate for small business has been 20% for many years now.  Whilst the corporation tax came down for larger businesses to 20%, the small business rate hadn’t changed – until now.  It will be 19% from 2017 and 18% from 2020.  If you own a limited company, this will be a decent tax saving for you.

2. Complete revamp of dividend tax.

Currently, you can take out £39,206 income tax free from your company (£10,600 salary and £28,606 dividends).  If you take out more dividends you are charged 25% extra income tax.  This is going to change.  There will be a new dividend tax regime.  No tax up to £5,000, and then tax rates at 7.5%, 32.5% and 38.1%.  We haven’t got the detail yet to see what will be the most tax efficient way of taking out money from the company (stay tuned!).

3. 40% band goes up to £43,000

The point at which you pay 40% income tax is currently £42,385.  This will increase to £43,000 next year (and apparently is on its way to £50,000 by 2020).

4. Tax-free amount (personal allowance) going up to £11,000

You can currently earn up to £10,600 tax free.  This is rising to £11,000 next year and on it’s way to £12,500 by 2020.

5. Employment allowance goes up to £3,000 by 2016.

You can currently save Employers National Insurance (which is usually 13.8%) on your first £2,000.  This is now going to increase to £3,000 by 2016.

More tomorrow….

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