Spring Budget 2017 – the key points

Date

Mar 10, 2017

Categories

Budget & Autumn Statement

The general consensus is that the Chancellor’s first, and last, Spring Budget was somewhat underwhelming. It had more of the feel of a Spring Statement rather than a full-scale Budget, maybe because the Chancellor is saving up his more major announcements for what will become the main annual financial update in the autumn.

Class 4 National Insurance Contributions to rise

This announcement has caused by far the greatest outcry. The self employed will have the rate they pay Class 4 National Insurance Contributions (NICs) increased from 9% to 10% in 2018/19, with a further 1% increase to 11% in 2019/20. Class 2 NICs are being abolished from April 2018. This tax rise has been viewed as sending a negative message to the business entrepreneurs who are helping to boost the UK’s economy; however the government argues that this increase will help to level the playing field between employed and self employed workers. Only a self-employed person with profits over £16,250 will pay more national insurance.

Tax-free dividend allowance

Following soon after its introduction in April 2016, the current tax free dividend allowance of £5,000 will drop to £2,000 in 2018/19. This is aimed at director owned companies that take high levels of dividends, but also catches general investors. It is estimated that approximately 2.27 million individuals will be affected, with a loss of £225 a year for a basic rate taxpayer, £975 for a higher rate tax payer and £1,143 a year for an additional rate tax payer. This measure is to limit the rise in smaller owner-managed businesses that it is claimed have incorporated as limited companies mainly for tax reasons.

Business Rates Relief

The Chancellor has announced that there will be support for small businesses that are coming out of small business rates relief. The additional amount they will have to pay on their business rates will be capped at a maximum of £600 in 2017/18. This is still a significant rise for some small businesses, and so local councils will be funded from a central pot of £300m so that they can give discretionary relief to help those businesses most affected by the revaluation. From April 2017, for one year only, pubs with a rateable value up to £100,000 can claim a discount of £1,000 off their business rates, which is said to benefit 90% of all pubs in the UK.

Making Tax Digital for Business

The Government is still committed to the “Making Tax Digital for Business” (MTDfB) project which is scheduled to start in April 2018. However, small unincorporated businesses and landlords with a gross income below the VAT threshold can breathe a sigh of relief, as the Chancellor announced that their entry date into MTDfB is being delayed by one year to April 2019. This group of businesses and landlords will now have more time to prepare for digital record keeping and quarterly updates, to enable them to conform to MTDfB requirements. In 2017/18 the VAT threshold is rising from £83,000 to £85,000.

Tax-free childcare scheme

A new tax-free childcare scheme is due to start in 2017. This will provide up to £2,000 a year in childcare support for each child below the age of 12, and up to £4,000 a year for parents of disabled children up to the age of 17. Parents of younger children can apply first, and then all other eligible parents by the end of the year. From September 2017, working parents in England can apply for an additional 15 hours of free childcare for 3 and 4 year olds, making a total of 30 hours per week.

Lifetime ISA

From 6 April 2017, adults under the age of 40 who save up to £4,000 each year can receive a government bonus of up to £1,000. The funds can be withdrawn tax-free to put towards a first home, or withdrawn unconditionally at the age of 60.

3 year NS&I Investment Bond

From April 2017, there will be a National Savings & Investments Bond with an interest rate of 2.2% on offer to everyone over the age of 16. This will be available for 12 months, and will apply to savings from £100 up to a maximum of £3,000.