April 6th marks the start of the new tax year. It's unlikely to be the most exciting occasion in your diary, but if you work in HR, payroll, or you manage an entire business, it's certainly a notable date!
Each new tax year comes with a range of tax and regulation changes affecting individuals and businesses alike. Big businesses tend to have the HR know-how and resources to handle these changes without a problem, but for smaller businesses, it's not that easy.
Unsure of which 2017/18 tax year changes will impact your SME? Here's everything you need to know.
#1 Minimum wage increase
Make sure you raise wages for the new tax year so that you're paying staff at least the legal minimum per hour.
Here are the figures for each age group.
- 25 and over: £7.50 (up from £7.20)
- 21 to 24: £7.05 (£6.95)
- 18 to 20: £5.60 (£5.55)
- Under 18: £4.05 (£4.00)
- Apprentices: £3.50 (£3.40)
#2 Personal allowance increase
The personal allowance will rise from £11,000 to £11,500. Employees won't need to pay tax on earnings below this threshold, assuming they aren't using their allowance at another job.
This shouldn't affect payroll too much - just make sure you use the right tax codes.
#3 Salary sacrifice schemes
From April 2017, new restrictions will be applied to salary sacrifice schemes because they were often used for tax advantages.
Employees will now have to pay tax (and employers will have to pay NICs) on most benefits provided in this way, including cars, technology, white goods, and car parking.
Crucially, cycle-to-work schemes, pension contributions and advice, childcare, and ultra-low emission vehicles will be exempt from these changes.
Current salary sacrifice schemes in place prior to April 2017 will remain protected from taxation until April 2018. Arrangements for cars, school fees, and accommodation will stay protected until April 2021.
#4 Skills charge for tier 2 employees
UK employers will now need to pay a skills charge for any tier 2 employees they sponsor. Medium and large sponsors will be required to pay £1000 per employee per year, and small businesses and charities will need to pay £364.
Business taxes and regulation changes
#5 Corporation tax cut
For the 2017/18 financial year, the main rate of corporation tax will fall from 20% to 19%. This rate will decrease further to 17% from April 2020.
#6 Cash basis accounting threshold change
From this tax year, if you run a business with a turnover of no more than £150,000 you will be eligible to use 'cash basis' accounting instead of traditional accounting. This is a significant increase from the previous threshold of £83,000.
Cash basis accounting is a simplified accounting method that sole traders and partnerships can use to record income that you receive during the tax year - not money owed at the end of the tax year. The same approach applies to expenses.
#7 Business rates relief
The long-delayed business rates revaluation finally takes effect this month in England and Wales. The government claims that three-quarters of businesses will see no change, or a fall, in their business rates bill.
Businesses in London and the south-east will see the largest increase in business rates.
There will be transitional relief available to businesses seeing the largest increases, but these funds will be taken from other business ratepayers - essentially the 'winners' of the revaluation will still see their bills rise to cushion the impact of business rate rises for other businesses.
Additionally, small business rate relief has been permanently doubled. Any properties with a rateable value of £12,000 or under will receive 100% relief. Properties with rateable values of between £12,000 and £15,000 will also receive some relief.
There will be an additional £1,000 of relief for pubs with a rateable value of less than £100,000.
You can safely ignore each of these changes if your business doesn't meet the relevant criteria.
#8 Apprenticeship levy
Affects businesess with annual pay bills of at least £3 million.
The new apprenticeship levy comes into force this month, adding a 0.5% tax onto larger employers' pay bills. Employers will receive an annual allowance of £15,000 to offset the levy.
#9 Reporting payment practices
Affects businesses meeting two or more of these thresholds: £36 million annual turnover, £18 million balance sheet total, 250 employees.
UK companies must report their payment practices, policies and performance via an online portal every six months, with the first report due in October 2017.
The government hope that this new reporting requirement will reduce late payments by large businesses.
#10 Gender pay gap reporting
Affects businesses with at least 250 employees.
From 2017, large businesses must publish and report information on their company's gender pay gap. That includes the mean and median pay gap in hourly pay, the mean and median gap in bonus pay, and the proportion of males and females in each pay quartile.
Companies need to publish their first gender pay gap report by 4th April 2018.
#11 Modern Slavery Act
Affects businesses with a turnover of at least £36 million.
Under the Modern Slavery Act, large businesses will need to publish an annual slavery and human trafficking statement in a prominent place on their website.
The statement must show the steps taken to ensure the company's supply chains (and the business itself) are free from slave labour. It should be uploaded to your website as soon as possible after the end of the financial year.
This year, there's not much extra red tape to navigate for SMEs. The biggest extra costs will arise from higher minimum wages, and potentially a bigger business rates bill. If you manage salary sacrifice schemes, it's time to revisit the benefits you offer as the tax benefits diminish.
Don't forget — we'll keep you up to date on all things small business right here on the RotaCloud blog.