Yesterday afternoon The Chancellor, Philip Hammond, delivered his first and last Spring Budget, giving a promising speech in which he altered very little within the tax system promoting a level of stability that we, as accountants, can only approve of.
Addressing Parliament for just 56 minutes he reaffirmed his intention to persist in cultivating a strong and fair economy, preparing Britain for a ‘global future’ in the face of Brexit and ‘making it the best place in the world to do business’.
Here are the top 10 things we think you need to know following the Spring Budget:
- Hammond confirmed that the tax-free personal allowance would increase to £11,500 and the higher rate tax threshold would increase to £45,000. The National Living Wage will also increase to £7.50 from £7.20 for workers aged 25 or over. Both measures take effect from April and will result in many full-time employees being financially better off.
- For the self-employed, Class 4 NIC’s will increase from 9% to 10% in April 2018 and again to 11% in April 2019; this certainly represents a hit for this demographic and such an attack fails to recognise the significant contribution they make to the British economy.
- The tax-free dividend allowance will shrink from £5,000 to £2,000 for shareholders of companies, undoubtedly affecting most owner-managed businesses, meaning many more people will end up with tax liabilities on dividends.
- Small businesses and landlords with an annual turnover below the VAT threshold will have until April 2019 to prepare for the transition to quarterly reporting, to HMRC, under the Making Tax Digital (MTD) regime.
- A £300m fund, given to local councils, will provide discretionary funding for those worst affected by the hike in business rates, plus those losing small business rate relief will see their monthly increase capped at £50 for a yearlong period; despite these measures many believe the consequences of the increases will only be delayed and not eliminated.
- Funding has been allocated for 110 new free schools, in addition to the existing commitment.
- Other investments include: £2bn in social care, £425m in the NHS, over £500m in technical education, £300m for academic research placements and £690m on infrastructure.
- For savers, the Lifetime ISA will become available from 6th April this year, allowing younger adults to save up to £4,000 each year, receiving a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn, tax-free, to put towards a first home or otherwise saved until the individual turns 60. For 12 months, from April 2017, the three-year NS&I investment bond with a 2.2% interest rate will be available to all aged 16 or over, allowing them to save between £100-£3,000.
- Tax-Free Childcare is on the horizon, providing up to £2,000 a year in support for each child under 12. Parents can receive up to £4,000 for disabled children up to the age of 17. Those parents of younger children will be eligible to apply first, with all eligible parents able to access the scheme by the end of the year. Working parents in England will also be able to submit an application for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.
- There will be no change to previously planned uprating’s of duties on alcohol and tobacco, however there is a new minimum excise duty applicable to cigarettes based on a packet price of £7.35.
As always, the issues raised and addressed in the Budget have lasting consequences for us as individuals, our families, our businesses and, on a larger scale, our economy.
Here at George Hay we are experienced in providing professional, and proactive tax advice, as well as a wide range of other advisory services, to businesses of all sizes, and individuals. If you’re concerned about any of the announcements in the Spring Budget, or have questions about how they might affect you or your business, please do contact our team of Tax experts.
The George Hay Spring 2017 Budget Summary, written by our experts, can also be found here.