Written by Ryan Fox, Published by Hairdressers Journal Apr 2018
The personal allowance - currently £11,500 will be increased in 2018/19 to £11,850 with the tax bands increasing accordingly up the scale.
Implications – Generally this is good news for directors and self-employed salon owners as it means the amount you can take out of the business tax free is increasing so you pay less tax. Make sure you are setup correctly as a business to take advantage of this otherwise you may be paying more tax than you need to.
Dividends - Dividend Allowance will be reduced from £5,000 to £2,000 from 6 April 2018.
Implications – this is bad news for salon owners who are directors as it means you will pay higher tax on dividend payments. Previously many directors didn’t pay personal tax on dividends with only the company paying corporation tax, but these changes put an additional tax burden that particularly hit small business owners. You may wish to reduce how much you take out of the business as dividends and look at more tax efficient uses of profits by for example reinvesting in your business or saving into a pension scheme for example.
Corporation tax rates - The main rate of corporation tax is 19% for the Financial Years beginning on 1 April 2018 and 1 April 2019 and then falls to 17% for the Financial Year beginning on 1 April 2020.
Implications – good news for companies as it lowers the amount of corporation tax you will have to pay.
VAT reporting going digital – from April 2019.
Implications – check with your Accountant for any changes that have to be made to your financial record keeping in order to comply with the new requirements.
Class 2 National Insurance contributions (NICs) will be abolished from April 2019.
Implications – may have some negative impact on self-employed individuals with low profits.
Cash and digital payments - cash use fell from 62% of all payments in 2006 to only 40% in 2016, the government is therefore looking at the role of digital payments in the growing digital economy which will include identifying what further work can be done to remove barriers to digital payments. The need for 1p and 2p coins and £50 notes are being considered and may be phased out.
Implications – ensure you are not making additional charges for clients paying with cards both in salon and online and ensure you have good cash handling and security checking procedures in place.
Employee expenses – simplifications regarding checking meal allowance and qualifying travel will apply from April 2019.
Implications – this should require less checking and evidence of receipts.
Plastic Tax – The government are considering tax changes to discourage use of single-use plastics items.
Implications – this may impact salon supplies as many are supplied in plastic containers. Cutting wastage is the first step so review your Stock Usage and Wastage to try and reduce the amount you need to buy which is better for the environment and will save you money.
Business rates - The business rates revaluation took effect in England from April 2017 and resulted in significant changes to rates that businesses will pay. The next revaluation of business rates will now be brought forward by one year to 2021.
Implications – you may be able to ask the Valuation Office Agency to recalculate valuations to reduce your rates.
*because of devolution, some measures do not apply in Scotland and Wales.
For more help and advice check out our Accountancy Service which is specifically designed for Salon Owners to help manage your finances…
07702 208 311