2017 budget brings blow for self-employed therapists
In his first budget as chancellor, Philip Hammond delivered several blows to the self-employed and small business owners.
As of April 2018 self-employed therapists will see their Class 4 national insurance contributions (paid by those earning over £8,060 a year) rise by 1% to 10%. This will further increase to 11% in April 2019. The chancellor justified the increases by saying the extra taxes will raise £145 million a year by 2021-22, making up the current cost to public finance as a result of lower national insurance contributions from self-employed workers, forecast to cost £5 billion this year alone. The change could have significant ramifications for those who rent rooms or salon owners who operate as sole traders, said the National Hairdressers Federation.
Hammond also announced changes to the tax-free dividend allowance for directors and shareholders to level out what he called an “unfair discrepancy” between the total tax paid by employed workers compared to small business owners. The allowance is to decrease from £5,000 to £2,000 from April 2018.
One potentially positive outcome for SMEs is that the Government is to give a £300 million fund to local councils to give struggling businesses a discretionary relief, following the recently announced higher business rates. In a further attempt to soften the blow, Hammond said that no business currently exiting small business rate relief will have to pay more than £50 extra a month when the changes come into effect next year.
NHF chief executive Hilary Hall commented: “Knowing there will now be a cap on any increase in their bill will be reassuring for many small salon businesses facing real hardship because of suddenly finding themselves ineligible for small business rate relief.
"However, we are disappointed that the chancellor did not use the opportunity of the budget to set out any plan for a more fundamental reform of business rates. Mr Hammond has indicated he is open to reform in the ‘medium term’. We’d argue the speed of change on the high street and the continuing threat from online retailers means there is now in fact an urgent need for business rates to be rethought.”