Budget summary 2017
The last Spring Budget
In December, Philip Hammond announced a change to the tax timetable: after March 2017, there will be just one annual Autumn Budget covering tax and spending. He started his March speech by recalling that one of his predecessors had made a similar decision 24 years ago, and joked that Norman Lamont had been sacked shortly afterwards. He did not dwell on the fact that Mr Lamont was overtaken by the financial turmoil caused by Britain leaving the European Exchange Rate Mechanism, which might have suggested uncomfortable possible parallels. Rather, he declared that the economy is in a robust condition, a strong and stable platform for Brexit negotiations.
The Chancellor was keen to show that he listens. In response to a clamour for action on social care for the elderly, he allocated £2 billion over three years. In response to protests that the new system requiring small businesses to make quarterly online tax reports was being brought in too quickly, he delayed it by a year for those with turnover below £85,000. And in response to complaints from many small businesses that the April 2017 rates revaluation would put up their costs sharply, he provided some transitional reliefs.
In keeping with Mr Hammond's low-key image, there were few announcements worthy of a headline - but one in particular is likely to be debated keenly. In the 2015 Conservative manifesto, they said: 'we can commit to no increases in VAT, Income Tax or National Insurance'. In his speech, Mr Hammond explained that self employed people now enjoy the same State pension entitlements as employees, so the much lower National Insurance Contributions (NIC) they pay are an unfair advantage. The 1% increases to self employed Class 4 NIC to come in April 2018 and April 2019 do appear to go against the manifesto commitment; Mr Hammond will no doubt respond that 85% of NIC payers are employees, the self employed have enjoyed a very significant advantage for a long time, the other category of self employed NIC (Class 2) is being abolished, and the self employed will still pay much less than employees. Even so, the measure sits unhappily in the same speech as an announcement that the Government will take steps to protect consumers from unfair small print in contracts.
When the Chancellor sits down, a great deal of small print is released by HMRC on the internet. We have summarised the main points in the pages that follow, and will be happy to discuss their impact on you and your finances.
- Few new announcements: most rates and allowances confirmed as expected
- Important measures already announced taking effect from April 2017: income tax allowances for trading and property income, restrictions on interest relief for buy-to-let, changes to foreign domiciled status, cut in Corporation Tax rate to 19%
- Increase in ISA investment limit and introduction of new 'Lifetime ISA' from April 2017
- Some transitional help for small businesses suffering from increases under business rates revaluation
- Delay on requirement for smaller businesses to make quarterly online reports to HMRC from April 2018 to April 2019, but 'Making Tax Digital' not otherwise delayed
- Threshold for simplified 'cash basis' for income tax accounts raised to £150,000 for 2017/18 and extended to landlords as well as traders
- Advantages of VAT Flat Rate Scheme likely to be removed for many traders covered by 'limited cost trader' rules from 1 April 2017
- Increases in Class 4 National Insurance Contributions for self employed to come in April 2018 and April 2019
- Decrease in nil rate band for dividend income from £5,000 to £2,000 in April 2018