Tax Updates from the Autumn Statement

In the autumn statement some new tax rules are being implemented and they are listed below:

Personal Allowance Update

From 06/04/2017 the new income tax threshold will be £11,500.00 saving the average uk adult in employment £100.00 in income tax per annum.

Flat Rate VAT Update

Chancellor Philip Hammond announced changes which affect businesses which have a very low cost base. These businesses are now called "limited cost traders".

Limited cost traders can still use the Flat Rate Scheme, but their percentage will be 16.5%. So if they sell £120 of work, including £20 of VAT, the flat rate amount is £19.80 (£120 x 16.5%).

A limited cost trader is defined as one that spends less than 2% of its sales on goods (not services) in an accounting period.

When working out the amount spent on goods, it cannot include purchases of:

• capital goods (such as new equipment used in a business)
• food and drink (such as lunches for staff)
• vehicles or parts for vehicles (unless running a vehicle hiring business)

A firm will also be a limited cost trader if it spends less than £1,000 a year, even if this is more than than 2% of the firm's turnover on goods.