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BUDGET


SPRING BUDGET 2017 –


THE IMPACT ON PHARMACISTS


AS YOU READ THIS, WITH BREXIT AND THE POTENTIAL FOR INDYREF2 TAKING ALL THE HEADLINES, YOU MAY HAVE ALREADY FORGOTTEN ABOUT THE FURORE CAUSED BY PHILIP HAMMOND’S BUDGET OF 8 MARCH AND, OF COURSE, HIS DRAMATIC U-TURN ON 15 MARCH.


By Mark Tenby, Director Martin Aitken & Co


Philip Hammond’s expected but significant attack on the self-employed certainly caused a stir and started a debate about the taxation differentials between the self-employed (individuals and business partners) and the employed/directors. Those in the latter group that are shareholders in pharmacy owning companies were also put on notice by Mr Hammond that the dividend tax threshold will be reduced from £5,000 to £2,000 from April 2018.


This is another part of what he deems to be the ‘unfair discrepancy’ between the total tax paid by an employed worker and other taxpayers. But, he must also be aware that this may bring those individuals with significant share portfolios back into tax, just when they may have been used to being outwith the system given the ‘old’ dividend threshold and the savings allowance.


The annual ISA allowance will rise to £20,000 from 6 April 2017 (it was £15,240 up to that date) so there are opportunities to reduce the impact of the threshold cut.


Remember that the dividend tax only came in to effect from 6 April 2016 so this threshold reduction was also quite unexpected, although it was always possible for the Chancellor to tweak the dividend tax in his favour – perhaps the tax rate will be the next target after the threshold is reduced?


But moving back to the self-employed, Mr Hammond says that lower National Insurance contributions (NIC) from self-employed workers are forecast to cost public finances £5bn this year


60 - SCOTTISH PHARMACIST


alone. To make the system ‘fairer’, he said that NIC would rise for the self-employed by one per cent to ten per cent from April 2018 and then to eleven per cent in April 2019. The impact on the self-employed was reduced by the complete removal of the flat rate Class 2 NIC from the system.


The self-employed asked why their taxes are rising while corporation tax rates are falling and are already lower than the rest of the G20. Remember that this rate is reducing from 20 per cent to 19 per cent from 1 April 2017 and is due to fall to 17 per cent from 1 April 2020. Mr Hammond’s justification was that the self- employed are now entitled to more generous state benefits than in the past so that their NIC rate should be increased towards the twelve per cent Class 1 NIC employee rate.


It’s an interesting argument that certainly stimulated debate about and among those perceived to be economic risk-takers. That debate rose to a crescendo on 15 March when, just one week after the Budget, Mr Hammond withdrew the NIC rise for the self-employed. What else could he U-turn on? Do his figures still stack up? Questions for another day and hopefully after this article is printed!


In my last article, I discussed the impact of Making Tax Digital (MTD) on individuals and businesses. In his Budget, the Chancellor re-stated the Government’s commitment to the project which is scheduled to start in April 2018 with the first quarterly updates being submitted by the self- employed and property landlords in July 2018. Many (including myself) expressed concerns about the


timescale for the introduction of MTD.


He announced a one-year deferral in the start date to 2019 for self- employed businesses and property landlords with gross income below the VAT registration limit (which is increasing from £83,000 to £85,000 per annum, effective 1 April 2017, whilst the deregistration threshold will increase from £81,000 to £83,000).


Another way of delaying the start of MTD would be to change the year end of your business. The legislation specifies that MTD will apply to accounting periods commencing on or after 6 April 2018. This means that if you currently prepare accounts to 30 April, the first quarterly submission to HMRC will be for the period to 31 July 2018.


However, if you changed the accounting date of your business to 31 March, the first submission would be to 30 June 2019. There are other tax considerations here but worth a conversation with your accountant if you feel that this may benefit you.


The 2017/18 increase in the personal


BIOGRAPHY Mark has more than 25 years’ experience in assisting a varied portfolio of clients helping them to grow both organically and through acquisitions, as well as preparing businesses for sale and succes- sion. Mark has specific expertise in working with start-ups, franchises, pharmacies, retailers and invest- ment companies and advises on all aspects of accounting, personal and corporate tax planning and wealth matters.


allowance to £11,500 was confirmed as was the corresponding rise in the higher rate threshold to £45,000, although in Scotland the latter figure will only apply to savings and dividend income. This is a historic personal tax differential within the UK.


The other big ‘tax’ debate in recent weeks has been around business rates and the Scottish Finance Secretary, Derek Mackay, announced a 12.5 per cent cap on increases for hotels, pubs and restaurants as part of the ongoing revaluation.


A Scottish Government review of the rates system lead by Ken Barclay is due to report in the summer. I wonder if that will produce more tax controversy, debate and possible U-turns to add to what we have already had in 2017 so far? Let’s wait and see…•


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