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Spring Budget 2017
Ken Simpson - March 9th, 2017
8th March 2017 saw the final Spring Budget for the foreseeable future, with future government legislation to be set out in Autumn Statements – starting later in 2017. In line with recent Spring Budgets the 2017 version confirmed many policies previously announced (mainly as part of the 2016 Autumn Statement) while also outlining some totally new ones.
We have set out some of the points which we consider most relevant to our business and taxation clients – some of which we can see will impact greatly on their affairs and decision making. They are intended to provide an aide memoire only, and further detail can be obtained from the official Policy Paper at:
https://www.gov.uk/government/publications/spring-budget-2017-documents/spring-budget-2017
Section 4 of that Paper incorporates the main taxation announcements.
Personal Tax
Personal Allowances – it has been confirmed that the personal allowance will increase for 2017/18 from £11,000 to £11,500. The point at which higher rate tax (40%) becomes payable has also increased by £2,000 to £45,000
National Insurance – In addition to confirming the abolition of the Class 2 flat rate charge on the self-employed from April 2018, the government has also announced that from that same date the rate of Class 4 NIC will increase from 9% to 10% (with a further 1% increase in April 2019). This rate applies to self-employed profits between £8,164 and £45,000. These proposals to increase the rate of Class 4 NIC were abolished on the 15th March 2017 by Philip Hammond.
Dividend Income – from 6 April 2016 a shareholder has been able to receive £5,000 dividends at 0% (although they still count towards an individual’s basic rate allowance). This amount is to be reduced to £2,000 from April 2018.
Salary Sacrifice – With a few exceptions (childcare, pension costs, cycle-to-work schemes, low emission cars) the tax and NI advantages of salary sacrifice schemes will be removed from April 2017 (although existing arrangements can remain in place until 6 April 2018 and up to 6 April 2021 for cars, accommodation and school fees).
Business Tax
As announced in November 2016, the rate of UK Corporation Tax is to be reduced to 19% from April 2017 and then to 17% in April 2020.
The point at which businesses can use a cash basis system for their accounts has been increased from £83,000 turnover to £150,000 and existing users can remain under the scheme if turnover if less than £300,000. This option has also been extended to landlords.
VAT
The registration threshold will increase to £85,000 from 1 April 2017, with the deregistration point at £83,000.
Pensions
The Money Purchase Annual Allowance is to be reduced from £10,000 to £4,000 from April 2017 – applicable to those who have already accessed their pension savings.
Savings
The new N S & I Investment Bond (announced in November 2016) will become available from April 2017 for a 12 month period, and will attract a rate of interest of 2.2% with a three year term.
Making Tax Digital
It has been decided to delay the point at which smaller unincorporated businesses and landlords must comply with new legislation requiring them to file records digitally on a quarterly basis. For any with turnover below the VAT threshold of £85,000 the deadline is now April 2019.
If you’d like a more in depth view at the changes coming with MTD please click the link – https://www.richardsexton.co.uk/2017/03/08/making-tax-digital/
Property Tax
The date for the reduction of the file-and-payment window from 30 days to 14 days in respect of Stamp Duty Land Tax has been delayed until 2018/19.
Trading and property income allowances
As announced in the 2016 Budget, and confirmed in the 2016 Autumn Statement, from 6 April 2017 there will be new Income Tax allowances of £1,000 each, for unincorporated businesses and landlords. The allowances can be deducted from income instead of actual expenses.
Insurance Premium Tax
There was confirmation that the standard rate of IPT is to increase to 12% from 1 June 2017.
How we can help
We are already responding to the new legislation by identifying clients who will be affected and by beginning to plan strategies to maximise opportunities which may be available. Some of the points above, such as the change in NIC rates and the reduction in the tax-free dividend allowance, are far-reaching and will impact on many businesses and individuals. Our aim is to pro-actively influence decision making in order to benefit our clients’ businesses and personal tax affairs, not merely following new legislation but generally throughout each tax year. If you believe that any of the issues outlined above may be relevant to your situation please do contact us to discuss and obtain more information. We would be very glad to hear from you.