Autumn Statement wish list for limited companies
Christmas is just around the corner and while limited company owners are all a bit old to be sending letters to Santa Claus, we thought we’d draw up a different wish list – one for the chancellor to read before his Autumn Statement.
1) Reappraise the dividend tax changes
From April 2016, changes to the rules governing dividend tax payments will make lots of limited company owners worse off.
The changes affecting limited companies will see the notional 10% tax credit on dividends abolished and replaced with a £5,000 tax free dividend allowance. Over this threshold, dividends could be taxed at a rate of up to 38.1% (for additional rate payers).
This regulation was announced at the July 2015 budget and it seems unlikely that the chancellor will U-turn before April. However, we urge George Osborne to judge other policy decisions (particularly his travel and subsistence proposals and pension reforms) within the context of these dividend tax changes.
The dividend tax already represents a tough pill for small limited companies to swallow. Introducing more tough tax restrictions now could have disastrous consequences on the small business community.
2) Pension protection
Many predict that George Osborne will target some of the tax reliefs on pension income. While this concern is certainly not unique to small business owners, it could put some self-employed people in a tricky spot.
To offset higher tax bills through changes to dividends, many small business owners might look to invest their money in a pension scheme. However, if this becomes less tax-efficient after the Autumn Statement then they will certainly think again.
We urge the chancellor to think carefully about these proposals and wait for the results of a review before making any decision.
3) Tax credit cuts
What George Osborne does with his tax credit proposals will almost certainly be one of the headlines of the Autumn Statement.
Having suffered an embarrassing defeat in the House of Lords the general feeling is that the chancellor will roll back the proposed cuts. But this is by no means assured. And in any case, we don’t really know how much he will ‘roll back’ on the £4.4bn of potential savings.
Tax credit changes won’t have a direct impact on small businesses. However, the subtext of some of the chancellor’s proposals is that he will expect employers to pay their staff more to help meet any income shortfall.
If you employ lots of people on a part-time basis then you could be forced to let some of them go.
4) Invest in infrastructure
Infrastructure investment is good news for limited company owners. Not only does better infrastructure (like better road links and faster internet) make running a business easier, but the contracts can often prove lucrative sources of income for businesses in industries like construction and IT.
We already expect positive announcements on projects like Crossrail and other Chinese-led infrastructure projects, but better fibre-optic cable coverage could help bolster the UKs reputation as a technology centre.
As a final wish list request, we hope the new National Infrastructure Commission will live up to expectations and help streamline and accelerate some of the most urgent infrastructure challenges.
If you have any more requests on your wish list please be sure to let us know on Twitter. Keep checking the blog for more news and analysis about the Autumn Statement in the coming days.