Spring Budget 2017 – how does it affect you?
Philip Hammond’s focus today was very firmly on government spending and investment and what he described as improving fairness in the tax system. This was the last spring budget – the annual budget will move to the Autumn this year, giving businesses and individuals more time to plan for announced changes going forward.
There was some good news on the economy. Amongst the major advanced economies, Britain’s growth in 2016 was second only to Germany. Employment is at a record high and unemployment is at an 11-year low. Also, reflecting the recent strength in the economy, the OBR has upgraded its forecast for growth this year from 1.4% to 2%.
Of the tax measures announced, the most significant are the changes to National Insurance Contributions for the self-employed and an unwelcome reduction to the dividend allowance. Smaller business owners will be pleased to hear that they will get some support to deal with the changes to business rates.
Below is a summary of some of today’s key announcements that may impact you and your business.
National Insurance Contributions (NICs)
- the main rate of Class 4 NICs will increase from 9% to 10% in April 2018 and to 11% in April 2019 for those earning more than £8,060 (employees pay 12%).
- Class 2 NICs will be abolished as planned in April 2018.
- The net result is that the self-employed with profits over £16,250 will pay more in NICs from 2018.
Shares and dividends
the dividend allowance which was only introduced in the current tax year will be reduced from £5,000 to £2,000 from April 2018.
Three business rates measures were announced:
- A discretionary support fund which local councils can use to assist struggling local businesses with their business rate payments between now and 2012-22
- Increases in rates for businesses that no longer meet the criteria for Small Business Rate Relief will be capped at £50 a month. The relief will apply between 2017 and 2022 and will help ease the transition.
- £1,000 discount for pubs with a rateable value of up to £100,000 in 2017-18.
Tax allowances and rates
- the personal allowance will rise from £11,000 to £11,500 on 6 April 2017.
- the threshold for higher rate taxes for most will therefore go up from £43,000 to £45,000, except in Scotland (owing to devolved powers) where it will be £43,000.
- The VAT registration threshold will rise to £85,000 from 1 April 2017.
- Corporate Tax Rates will fall to 19% from April 2017 and then again to 17% in 2020, as previously announced.
Self-employed and landlords – Making Tax Digital
- Unincorporated businesses and landlords with a gross income below the VAT registration level will be deferred from entering the making tax digital regime until April 2019.
- Those with a turnover above the VAT registration level will have to make quarterly returns to HMRC from April 2018.
Pensions and savings
- The ISA allowance will increase in April 2017 to £20,000.
- As previously announced, a new Lifetime Individual Savings Account (LISA) for those aged between 18 and 40 will become available on 6 April 2017. Up to £4,000 a year can be saved into the account and the government will add a 25% bonus if the money is used to buy a first home or retained to be used as a pension from the age of 60.
- A reduction in the money purchase annual allowance (MPAA) from £10,000 to £4,000 comes into effect on 6 April 2017. This reduced allowance impacts those who have already started to access their pension funds but are still looking to make further contributions.
Tomorrow we will send you a fuller report on the budget and a reminder of other relevant changes that come into force today or at the beginning of the new tax year.
In the meantime, if you would like to discuss how you are affected by these changes, please contact your usual WMT partner or director, or Anne-Maree Dunn.