Whilst the recent positive economic results may have provided Philip Hammond’s first (and last) Spring Budget with an upbeat tone, questions over the UK’s global economic future outside of the EU meant that the Chancellor needed to stick with his reputation and maintain a steady path. To ensure we have enough “gas in the tank” for the Brexit journey, the Chancellor is raising taxes and investing more in infrastructure and technical training, to secure the funds, tools and skills he thinks the country will need.
To aid small businesses who are facing increased business rates this year, digital quarterly reporting next year, announcements were made to soften the rates increases and delay the introduction of digital reporting although this was tempered by the NI increases and reduction of the dividend allowance.
The main announcements are summarised below and a more detailed report will follow soon.
• Corporation tax reductions confirmed. Will be 17% by 2020
• Making Tax Digital delayed by one year for businesses with turnovers below the VAT registration threshold (£83,000)
• Reform of the business rates revaluation process promised
• Cap on business rates increases for those business leaving the Small Business Rates Relief scheme. Plus extra £300m fund for businesses hardest hit by rates rises.
• Promise of further tax reforms for the self employed
• National Insurance Contributions for the self employed to be aligned with employees. That means a 1% increase in Class 4 NICs from April 2018 to 10% and then a further 1% in April 2019. Class 4 NICs were not included in the government’s tax lock.
• £5,000 Dividend Tax Allowance reduced to £2,000 from April 2018.
• National Living Wage to rise to £7.50 per hour from April 2017
• Personal tax allowance to rise to £12,500 as planned by 2020
• More infrastructure spending on technology to improve productivity
• New “T levels” to promote technical training to be on a par with “A levels”.
• Forthcoming schools white paper to introduce greater selection of pupils
• Free school transport for children who have free school meals
• Social care grant funding of £3bn over the next three years to bridge the funding gap
• Green paper promised on future financing of social care that will not include a “death tax”
• £10bn extra funding for the NHS to 2020
• Salary sacrifice schemes scrapped from April 2017 except for ultralow emission cars, pensions, childcare and cycle schemes
• The charge for the Annual Tax on Enveloped Dwellings will rise in line with inflation for 2017/18
Recap key tax changes previously announced
- Tax free personal allowance £11,500 from April 2017
- Higher rate threshold raised to £45,000 from April 2017
- Apprenticeship levy for large companies from April 2017
- Tax relief for landlord’s finance costs restricted from April 2017
- Certain non-UK dom individuals become UK doms from April 2017
- New IHT nil-rate band for residences from April 2017
- £1,000 tax free allowances for micro businesses from April 2017
- New Lifetime ISA for anyone under age 40 from April 2017
- ISA annual limit becomes £20,000 from April 2017
- Termination payments attract employers’ NIC from April 2018
- Corporation tax reduced from 20% to 17% by 2020
- Business rates devolved to local authorities by 2020
- Insurance Premium Tax increases to 12% from June 2017