“It was unnervingly quiet in advance of the Budget statement today and perhaps we now know why.
“Phillip Hammond presented an upbeat outlook on the UK economy with a warning that we still carry debt of £1.7tn and pay the equivalent of almost £62,000 per household in interest every year. With that background, his assertion that any spending commitments announced today would be fully funded within the Budget left him with little room for manoeuvre.
“He also mentioned that he had a goal of making the tax system fairer, and certainly, as he presented the rationale behind the increase in Class 4 NICs for the self-employed and the reduction of the dividend allowance to £2,000 from April 2018, he was at pains to point out what he saw were unfair outcomes of the previous approaches. These changes will clearly have an impact for clients, many of whom who will have altered their business structure to take advantage of the more favourable environment and they will be well advised to take appropriate advice to ensure that they understand the impact the changes will have on them.”
“For those clients who benefited from the £5,000 dividend allowance in respect of their personal investment portfolio, they will have less room for dividends to be captured in the £2,000 allowance from April next year. On the plus side, the imminent increase in the ISA allowance to £20,000 will still provide a welcome increase in tax efficiency.”
“The announcement of a Green Paper on social care before the end of this year is to be welcomed. This is an area that worries many clients and, for various reasons, has not been properly addressed. This has to move up the scale of importance and an effective long-term strategy will hopefully emerge as a result of the process”.
TAX-FREE DIVIDEND ALLOWANCE
This will be reduced from £5,000 to £2,000 from April 2018. This will reduce the tax difference between the self-employed and those working through a company, along with investors invested in collective portfolios or receiving share dividends
SELF-EMPLOYED NATIONAL INSURANCE CONTRIBUTIONS
The abolition of Class 2 National Insurance contributions for the self-employed from 6 April 2018. Class 4 National Insurance Contributions will rise to 10% in April 2018 and 11% in April 2019.
THREE-YEAR NS&I INVESTMENT BOND
A market-leading interest rate of 2.2% will be available for 12 months from April 2017. It will be open to everyone aged 16 and over with the flexibility to save between £100 and £3,000 over three years.
The new lifetime ISA launches in April 2017 for adults under the age of 40, with a maximum contribution of £4,000 per tax year and a 25% bonus. The standard ISA investment limit rises to £20,000 per tax year at the same time.
For 2017 to 2018, the basic Personal Allowance will be £11,500 and the basic rate limit will be £33,500. For Scottish taxpayers, the basic rate limit will be £31,500.
CAPITAL GAINS TAX
The annual exempt amount (AEA) for individuals and personal representatives will increase from £11,100 to £11,300 in April 2017.
The AEA for most trustees will also increase in April 2017 to £5,650, having been frozen for the last three years at £5,550.
MONEY PURCHASE ANNUAL ALLOWANCE
Following the recent consultation the Government has today confirmed that the Money Purchase Annual Allowance (MPAA) will reduce to £4,000 per tax year from April 2017. The £4,000 MPAA will apply to everyone who has accessed their pension flexibly, regardless of the date at which they accessed it.
ADULT SOCIAL CARE
£2 billion for adult social care over the next three years. This will help councils to provide high quality social care to more people and help to ease pressure on the NHS.
£425 million investment in the NHS in the next three years. £325 million will be invested in a first set of the best local Sustainability and Transformation Plans (STPs). £100 million will go to A&E departments in 2017-18 to help them manage demand ahead of next winter, and help patients get to primary care faster.
Investment in technical education for 16 to 19 year olds rising to over £500 million. New T-levels for 16 to 19 year old technical students will be introduced from autumn 2019. Students will be able to choose from 15 different routes such as construction, digital or agriculture.
ACADEMIC RESEARCH PLACEMENTS
£300 million investment for new academic research placements. £90 million will provide 1,000 new PhD places, including in science, technology, engineering and maths. £210 million will create new fellowships, including programmes to attract top global talent to conduct research in areas such as bioscience and biotechnology, quantum technologies, and satellite and space technology.
LOANS FOR PART-TIME AND DOCTORAL STUDENTS FROM 2018
The government will provide maintenance loans for people entering part-time degrees, and doctoral loans of up to £25,000 to support higher-level study.
FREE SCHOOL FUNDING
£536 million for 110 new free schools and to maintain existing schools. £320 million will go to new free schools. Free schools are funded by the government but set up by groups like parents, charities or community and faith groups. £216 million will be invested in school maintenance.
FREE TRANSPORT FOR CHILDREN
For children from poorer families who go to selective schools. Children aged 11 to 16 who get free school meals or whose parents are on the Maximum Working Tax Credit will get free transport to their closest selective school, if it is between two and 15 miles away from their home. Children aged 8 to 16 are already entitled to free transport to their closest suitable school if they live more than three miles away.
This will soon be available to working parents. Tax-free childcare will provide up to £2,000 a year in childcare support for each child under 12. Working parents in England will also be able to apply for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.
NEW WAYS TO PROTECT CONSUMERS
The government will investigate ways to protect consumers from unnecessary costs and inefficiencies, including:
- preventing consumers being charged unexpectedly when a subscription is renewed or a free trial ends
- making terms & conditions simpler and clearer including in digital contracts, like when you sign up to a social network
- fining companies that mislead or mistreat consumers
IMPROVING TRANSPORT WITH THE NATIONAL PRODUCTIVITY INVESTMENT FUND (NPIF)
The government is funding improvements to transport infrastructure.
A new strategy to make the UK a world leader in 5G technology.
INTERNATIONAL WOMEN’S DAY
A new £5 million fund will go to projects celebrating the 100th anniversary of the Representation of the People Act next year, and to educate young people about its significance.
SMALL BUSINESS AND LANDLORDS
Those under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD)
RESTRICTION ON LANDLORDS’ INTEREST RELIEF
The phased restriction of tax relief on interest payments by residential property landlords will start in April 2017 as already legislated. If you haven’t already consulted with your tax advisers on this, you would be advised to do this as soon as possible.
Another consultation on the taxation of benefits in kind, accommodation benefits and expenses has been announced. Details will follow in due course. The forecast is that the number of people in work is set to grow each year with a further two thirds of a million people in work by 2021.
The corporation tax rate will fall to 19% in 2017 and will be reduced to 17% from 1 April 2020.
RESEARCH AND DEVELOPMENT (R&D) TAX CREDITS
Industrial strategy green paper will set out the government's ambition to drive investment into science research and innovation.
The Chancellor recognised a number of difficulties that businesses will face as a result of the recent revaluation exercise, which takes effect in England from April 2017. Support will be given to small businesses losing small business rate relief. In addition they will provide English local authorities with £300 million of discretionary relief to allow them to support individual hard cases in their area. The Government will also introduce a £1,000 business rate discount for pubs where there is a ratable value of up to £100,000, subject to other limits.
Registration and deregistration thresholds – From 1 April 2017 the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.
INSURANCE PREMIUM TAX (IPT)
Insurance Premium Tax (IPT) – The government will legislate to introduce anti-forestalling provisions and increase the standard rate of IPT to 12% from 1 June 2017, as announced at Autumn Statement 2016
AVOIDANCE, EVASION AND COMPLIANCE
In this Parliament, the government has announced it will legislate for over 35 measures to tackle avoidance, evasion and aggressive tax planning.
This effects QROPS transfers requested on or after 9 March 2017 and they will be taxable unless, from the point of transfer, both the individual and the pension savings are in the same country, both are within the European Economic Area (EEA) or the QROPS is provided by the individual’s employer.
If this is not the case, there will be a 25% tax charge on the transfer and the tax charge will be deducted before the transfer by the scheme administrator or scheme manager of the pension scheme making the transfer.
For more information on these changes, please do not hesitate to contact us directly.