The 2016 Autumn Statement Summary – Major VAT Flat Rate Scheme Change

The new Chancellor of the Exchequer, Philip Hammond, has delivered his first Autumn Statement today.

In a significant change to small businesses, from April 2017, a new VAT Flat Rate of 16.5% will be introduced for businesses with limited costs, such as labour-only businesses. As the Flat Rate applied to the gross invoice amount, this equates to 19.8% of the net leaving just 0.2% for the business.

A provision is already in place to treat any invoice raised between today and 1st April 2017 for a service to be performed on or after 1st April 2017 as taking place on 1st April 2017. In other words, there is no opportunity to invoice in advance to keep the benefit of the current rate.

Other highlights were:

The commitment to raising the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21 was reaffirmed. From April 2017, the levels will be £11,500 and £45,000 respectively.
The commitment to cutting Corporation Tax to 17% by 2020. This reduces to 19% from April 2017.
From April 2017, most salary sacrifice schemes to be taxed as cash income. Only pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt but there will be transitional arrangements for existing schemes.
From April 2017, the National Living Wage will increase from £7.20 per hour to £7.50 per hour for those aged over twenty-five. The National Minimum Wage will also increase as follows:

from £6.95 per hour to £7.05 for 21 to 24 year olds;
from £5.55 per hour to £5.60 for 18 to 20 year olds;
from £4.00 per hour to £4.05 for 16 to 17 year olds; and
from £3.40 per hour to £3.50 for apprentices.

A new three-year NS&I Investment Bond will be available from spring 2017 offering an indicative rate of 2.2% on savings of up to £3,000.
A new National Productivity Investment Fund to provide £23 billion of additional spending on transport, digital communications, R&D and housing to facilitate the UK economic fitness for the future.
Insurance Premium Tax will increase by from 10% to 12% from 1 June 2017. Although this is a tax on insurers, the expectation is that this cost will be passed on to consumers.
A consultation on a ban on Letting Agents charging fees to tenants.
Fuel duty will remain frozen for a seventh consecutive year.

Our detailed review of the Autumn Statement will be published tomorrow. In the meantime, if you would like to discuss how the Autumn Statement will affect you, please email us at tax@cooperfaure.co.uk.

There is still time to register here for our Impact of the Autumn Statement webinar running on Monday 28th November at 1pm.

The 2016 Autumn Statement Summary – Major VAT Flat Rate Scheme Change

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