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Spring Budget report and key announcements

Chancellor Philip Hammond delivered his first and last Spring Budget on 8 March 2017 and described it as one that “takes forward our plan to prepare Britain for a brighter future.”

The economic forecasts outlined by the Office for Budgetary Responsibility (OBR) were broadly in line with those from the Autumn Statement in November 2016. Growth is predicted to be 2 per cent in 2017, up from 1.4 per cent forecast in the last Autumn Statement, which the Chancellor described as "robust growth".

Overall, the Spring Budget was relatively light on new announcements, but included measures that will affect businesses, individuals and the UK as a whole – these are covered in our 12 page Spring Budget report.

Key measures announced for businesses:

  • Headline rate of corporation tax will reduce to 19 per cent from April 2017, and fall to 17 per cent by 2020 as planned.
  • £435 million for companies affected by rise in business rates, including £300 million for those affected most.
  • Rate rises for businesses losing existing small business rate relief to be capped at £600 per year.
  • £1,000 business rate discount for pubs with a rateable value of up to £100,000, for one year from April 2017.
  • Unincorporated businesses and landlords will have until April 2019 to prepare before ‘making tax digital’ becomes mandatory.
  • National living wage for over 25 year olds will be £7.50 an hour from April 2017.
  • Levy rate for added sugar drinks to be set at 18 pence per litre for main band and 24 pence per litre for higher band.
  • Standard rate of insurance premium tax to increase from 10 per cent to 12 per cent from 1 June 2017 (as announced in the Autumn Statement 2016).

How will the Spring Budget affect businesses?

Three measures were announced by the Chancellor to help businesses facing significant increases in business rates, including a cap that prevents the rise increasing by more than £50 per month. Local authorities will have access to a hardship fund of £300 million for small businesses that are worst affected. There will also be a £1,000 discount on business rates for pubs with a rateable value of £100,000 or less.

Insurance premium tax rises to 12 per cent, as previously announced in the Autumn Statement 2016, affecting commercial and motor insurance premiums.

Corporation tax is reduced to 19 per cent, with a further cut to 17 per cent to follow in April 2020. Small business owners may want to consider accelerated pension funding ahead of any future rate cut, to reduce profits that would otherwise be taxed at the higher rate.

Key measures announced for individuals:

  • Main rate of national insurance contributions (NICs) Class 4 for the self-employed to rise from 9 per cent to 10 per cent in April 2018 and 11 per cent in April 2019. The increase will apply to earnings below £43,000.
  • NICs Class 4 contributions on earnings above £43,000 to be taxed at 2 per cent.
  • NICs Class 2 contributions, a separate flat rate contribution paid by the self-employed who make a profit of more than £5,965 a year, will be abolished as planned in April 2018.
  • Money purchase annual allowance (MPAA) to reduce from £10,000 to £4,000 per year with effect from 6 April 2017.
  • Transfers to qualifying overseas pension schemes requested on or after 9 March 2017 are to be taxable, though exceptions apply.
  • £5,000 tax-free dividend allowance introduced in April 2016 is to be reduced to £2,000.
  • Standard rate of insurance premium tax to increase from 10 per cent to 12 per cent from 1 June 2017 (as announced in the Autumn Statement 2016).
  • Tax-free personal allowance to increase to £11,500 from 6 April 2017. Higher rate threshold to increase to £45,000 except in Scotland where it remains at £43,000.
  • Lifetime ISA to be available to individuals aged between 18 and 40 from 6 April 2017, allowing for savings of up to £4,000 per annum.
  • Previously announced new NS&I bond will be available from April and will pay 2.2 per cent on deposits up to £3,000.
  • Anti-tax avoidance measures will prevent converting capital losses to trading losses.

How will the Spring Budget affect individuals?

Self-employed workers will see changes in national insurance contributions (NICs) due to “new challenges”. Philip Hammond also said the changes will “get the relationship between employed and self-employed national insurance contributions into a fairer place." 1.6 million unemployed Britons will pay an average of £240 more in national insurance per year.

The money purchase annual allowance (MPAA) will reduce from £10,000 to £4,000 per year with effect from 6 April 2017. The MPAA was introduced to prevent savers abusing the rules by taking money out of their pension and then reinvesting it in the same year to benefit from extra tax relief.

The annual dividend allowance introduced last year will remain at £5,000 for the 2017/18 tax year, but will then fall to £2,000 from April 2018. This will particularly affect small and medium sized business owners who take their profits as a dividend.

Other

  • Extra £2 billion for social care over the next 3 years.
  • Funding for 110 new grammar schools and free schools.
  • £90 million for the north and £23 million for the midlands for improvements to the road network.
  • Fuel duty remains frozen.
  • New T level qualification for technical education.
  • £100 million for new triage programmes at English hospitals.

For more details please download our Spring Budget report.

 

 

 

Please note:

The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. The information in this report is based upon our understanding of the Chancellor’s Spring Budget 2017, in respect of which specific implementation details may change when the final legislation and supporting documentation are published. This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. ISA and pensions eligibility depend on personal circumstances. The value of investments can fall as well as rise and you may not get back the full amount you originally invested. Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. All tax tables include numbers, rates and allowances only. None of the usual qualifying notes are included in this report.



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