Another final Spring Budget

09/03/2017
Another final Spring Budget

As the Chancellor mentioned this is the second time that a budget has been described as the final Spring Budget. For some of us the previous occasion does not seem that long ago – only 20 years. The then, as now, was that announcing tax changes in the Autumn allows time for the legislation to be finalised before the beginning of the tax year on 6th April. Very sensible. In 2016 the tax legislation for the year was only finalised in September almost half way through the year.

The key surprise in the Budget was the strong statement that the self-employed pay less tax than employed people with the same earnings – and that directors of their own companies pay less than the self-employed. He believes that this is unfair. As a result he is increasing Class IV NIC to 10% and reducing the tax free dividends each year to £2,000 and other measure are promised. Many Tories are apparently unhappy that this breaches an election promise to not increase NIC or tax. The reduction on the tax free dividends will affect more people than just those with their own company.

Other matters in the budget are as follows:-

Budget round up – March 2017

UK second-fastest growing economy in the G7 in 2016 

New borrowing forecasts

2016-17: £51.7bn, down from £68.2bn in the autumn statement

2017-18: £58.3bn, down from £59bn

2018-19: £40.8bn, down from £46.5bn

2019-20: £21.4bn down from £21.9bn

2020-21: £20.6bn, down from £20.7bn

2021-22: £16.8bn, down from £17.2bn

New growth forecasts

2017: 2%, up from 1.4% in the autumn statement

2018: 1.6%, down from 1.7% in the autumn statement

2019: 1.7%, down from 2.1% in the autumn statement

2020: 1.9%, down from 2.1% in the autumn statement

2021: 2%, matching the 2.0% forecast in the autumn statement

NHS

A £100m fund set up to fund GP triage projects in A&E departments, to relieve pressure on them next winter.

Some NHS sustainability and transformation plans (STPs) will be available before the autumn. £325m will be available for them.

Hammond announces an extra £2bn for social care over next three years, with £1bn available in 2017-18.

Long-term funding options to be considered but so-called “death tax” on estates ruled out

Education

Funding for an extra 110 free schools, on top of 500 already announced. Some will be specialist maths schools, he says.

Free school transport to be extended to all pupils on free school meals at a selective school.

An extra £260m will be invested in improving school buildings.

New T levels introduced to give parity of esteem for technical education

Time spent by students doing technical training is to be increased by 50%.

Technical students to have access to student loans, like students at university.

£300m to support 1,000 new PhD places and fellowships in STEM (science, technology, engineering and maths) subjects

Business

Tax-free dividend allowance to be reduced from £5,000 to £2,000 from April next year.

From April this year, Corporation Tax will fall to 19%, the lowest rate in the G20. In 2020 it will fall again to 17%

A tax avoidance clampdown announced totalling £820m to include action to stop businesses converting capital losses into trading losses, tackle abuse of foreign pension schemes and introduce UK VAT on roaming telecoms services outside the EU.

Self employed – class 4 NICs will increase from 9% to 10% in 2018, with a further 1% rise in 2019. Treasury to raise an extra £145m by 2021-22 through extra tax on the self-employed.  The move will cost 60p a week to the average self-employed person and save the Government £145m by 2021-22

Business rates

Any business coming out of small business rate relief will benefit from an extra cap – meaning their rates will not increase by more than £50 a month.

There will be a £1,000 discount on business rate bills for all pubs with rateable value of less than £100,000 – 90% of all pubs.

A £300m fund will be made available to councils to allow them to provide discretional relief.

HMRC reporting – Introduction of quarterly reporting delayed for small businesses for a year, at a cost of £280m.

Personal Allowance

The personal allowance – the amount you can earn before paying income tax – will rise with the start of the new tax year from £11,000 to £11,500.

The threshold for paying higher-rate, 40pc, tax will also rise from £43,000 currently, up to £45,000.

The level at which high earners start to pay additional-rate, 45pc tax, remains unchanged, at income over £150,000.

Savings

The amount you can save into an Individual Savings Account (Isa) rises from £15,240 to £20,000 from April.

The rules by which Isas may effectively be “inherited” after the holder’s death are to be relaxed, possibly as soon as next month.

Lifetime ISA

From April 6, savers can put £4,000 a year into a Lisa, which will be topped up with a 25pc government “bonus”, making a total of £5,000 saved each year.  To open the account, you have to be over the age of 18 and under 40. You can continue to contribute – and receive the bonus – until your 50th birthday. You can only take out your cash penalty-free from age 60 or if you are using it for a deposit on your first property. You can also withdraw money if terminal illness or death occurs. Cashing in early for any other reason will see a 25pc exit penalty applied.

Buy to let landlords

From April, buy-to-let investors won’t be able to offset the full cost of their mortgage interest against rent.

This change was announced in 2015 and will be phased in from the 2017-18 tax year, when only 75pc of interest will be deductible.

Housing, transport and infrastructure

Transport spending of £90m for the north of England and £23m for the Midlands to address pinch points on roads

£270m for new technologies such as robots and driverless vehicles

£16m for 5G mobile technology and £200m for local broadband networks

£250m in funding for Scottish Government, £200 for Welsh Government and £120m for Northern Ireland Executive

Inheritance tax

The “main residence nil-rate band”, or the “family home allowance”, is worth £100,000 per person when passing on a main residence in addition to the normal £325,000 per person allowance.

Each individual can pass on £425,000 without paying inheritance tax (40pc) so long as it includes the family home and passes directly to children or grandchildren, and not via a discretionary trust.

The new allowance will increase by £25,000 a year until it reaches £175,000 in April 2020. That will give each person a £500,000 allowance; £1m for a couple. On first death, any unused allowance will pass to the surviving spouse or civil partner.

Estates worth £2m will see the additional band tapered so they lose £1 for every £2 over the threshold.

Women

New funding totalling £20m to support the campaign against violence against women and girls

A further £5m committed to project to celebrate the centenary of women first getting the vote, and to educate young people about its significance

Funding of £5m to support people returning to work after a career break

Cigarettes, booze and fuel!

A new minimum excise duty on cigarettes based on a packet price of £7.35

No increases in alcohol or tobacco duties on top of those previously announced

Vehicle excise duty rates for hauliers and the HGV Road User Levy frozen for another year.


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