Running a business can be extremely expensive, with tax being a huge expense for most companies. However, the UK Government has made recent changes to the tax system that will benefit many businesses, allowing them to grow, creating more job opportunities.
Digitalising Tax for Businesses
The tax year can be tough for a business as trying to record your tax can be a long, difficult process. For this reason, the Government has introduced making tax digital for businesses, to ensure that they have an accurate account of their tax. This is will help businesses stay clear of any errors as well as providing them with a clear view of their tax position.
This new system brings tax into the digital age, making life simpler and more efficient. It will also ensure that that business gets their taxes right, reducing any errors that may occur, providing a business with greater certainty. This digitalisation of tax is anticipated to reduce tax errors by 10%, which will give a business a clearer view of their tax year, as well as allow them to plan the following year.
This system has been put in place to ensure that businesses keep a record of their income and expenditure digitally so that they can send quarterly summary updates to HMRC.
Cutting Corporate Tax by 2020
The UK Government has implemented a new incentive to help businesses with the amount of corporate tax that they need to pay. By 2020 the government promise that corporate tax will be cut to 17% to help the business grow and invest.
They also mention that this incentive will help over 1 million companies in the UK to invest and grow, with the hope that more job will be produced.
The rate of corporate tax has been cut in the past, however, this low rate of 17% is by far one of lowest rates. When this incentive is put in place, in 2020, it will be the first corporate tax cut in 10 years as the last time the tax was cut was in 2010 when the rate fell from 28% to 20%.
Salary Sacrifice Schemes Will Be Taxed at A Fair Rate
The UK government has changed the amount of tax for salary sacrifice schemes to the same as cash income to make it more appealing to businesses. The salary sacrifice scheme allows you to use part of your salary to be given a non-cash benefit from your employer, these benefits can include, a work mobile phone or childcare vouchers for example. If you agree to the salary sacrifice scheme your overall pay is lower, meaning that you pay less tax. This new incentive will be put in place by April 2017 by the UK government.
This scheme, however, does exempt a few items, such as pensions, ultra-low emission cars and childcare. The government have also stated that any arrangements that are already in action before April 2017 will be protected for up to a year, and any arrangements before April for cars or school fees will be protected for up to four years.
Changes in Tax
With these new changed in the tax system, more and more benefits for businesses are arising, making life easier and cheaper for businesses. It is important to know the changes that are occurring in tax to ensure you are getting the best for your business.