WHAT DOES PHILIP HAMMOND'S FIRST AND LAST SPRING BUDGET MEAN FOR YOU?
He said this budget prepares us for Brexit, gives greater opportunity to the future and makes the economy more robust. Time will tell…
Changes for you
Top 1% of taxpayers, pay 27% of the income tax.
After lots of talk around National Insurance Phil announced that From April 2018, with the abolition of class 2 NICs, comes an increase of 1% on class 4 NICs, and a further 1% increase in April 2019.
This raises £145m a year and those with earnings below £16,250 will see a net saving with the combination of the scrapping of the flat rate and the increase.
Philip talked a lot about the ‘unfairness’ of dividend and finished by announcing the dividend allowance was to fall to £2,000 a year in April 2018.
The Personal allowance will increase to £11,500 and HRT threshold to £45,000 this April.
In the Autumn Statement, Philip mentioned an NS&I bond, the offer was released at around 12:50 p.m. you can earn 2.2% on deposits up to £3k over three years.
The ISA allowance is set to increase to £20,000. Of this, those below the age of 40 will be able to open a Lifetime ISA and receive a government bonus of 25% on every premium up to £4,000.
Changes for your business
Businesses with t/o below the VAT threshold will not have to comply with quarterly reporting for another year, with the VAT threshold rising to £85,000 and deregistration rising to £83,000 this April this may be of interest.
Business rates raise £25bn a year for local authorities. Focus will turn to properly taxing the digital economy. Business rates revaluation process is to be reviewed.
Businesses losing small business rate relief will have their bill increases capped to £50pm.
All pubs will see £1k off their business rates for all pubs with a rateable value of less than £100K. Local Authorities are to be given discretion to provide for discounts.
Mr. Hammond disclosed a crackdown on businesses that convert capital losses into trading losses inappropriately.
On Corporation tax, the plan sticks, with a reduction to 19% on 6th April this year and falling to 17% by 2020 as planned.
Other interesting news
Universal credit taper to reduce
Consumer bodies to be given more powers
£20m made available to help tackle domestic violence
£300m of the £23bn infrastructure funds to fund R&D and £270m of the same for disruptive technology, £200m for local projects on fibre, £16m for new 5G ‘hub’, £690m for local authorities to tackle urban traffic flow etc.
New free schools to be increased from 500, to 610, with free transport to those qualifying for free school meals and who attend selective schools.
New investment in the new ‘T’ levels to harmonise the work-based qualification scheme (T stands for Technical). This should harmonise qualifications like BTEC, City & Guilds and NVQ’s etc.
Philip talked about the pressures on the NHS and the problems of bed-blocking and announced £2bn of grant funding over the next 3y for social care, with £1bn available over the next year. A green paper to discuss a way in how to fund this later – it has been suggested that this may be by some form of death tax.
The Sugar tax is definitely happening, with those that contain a lot of sugar paying 24p per litre.
What wasn’t mentioned?
In all the hype beforehand we were expecting some tinkering with pensions and none came. What with the tax year being very close and Philip’s preference not to startle the horses with last minute tax changes we anticipate that these changes will come in the 2017 Autumn Budget.
The timetable is changing this year, with the budget being moved to replace the Autumn Statement and an economic statement being made by the chancellor in Spring.
We expected changes to death taxes and radical national insurance changes to address the gap between employees and directors of their own companies and the self-employed.
The dividend allowance was not a shock, indeed the shock was that there is any left at all. The whole dividend allowance was a stealth tax dressed up as ‘new allowance’ where one could earn up to £5,000 without paying any tax. This used to be exactly the same up to your basic rate threshold. Very few people ended up paying less tax.
I expect that with the reduction in tax take from corporation tax, that there will be a much increased dividend tax.
Overall, no real surprises and any changes will have a limited impact on very few people. I’d rate this as being a good budget overall. Infrastructure is the one thing the private sector just doesn’t do and a focus of spending on that is key.
OBR forecast for economic growth.
Borrowing predicted over the year
£ 51.7 BN
£ 53.8 BN
£ 40.8 BN
£ 21.4 BN
£ 20.6 BN
£ 16.8 BN