We have produced these notes from Phillip Hammond’s first and last ‘Spring Budget’ to give you a basic summary of the highlights arising from the budget in respect of Individuals and Companies. Not every aspect will apply to you, and if you should you require further information, then please contact our offices on 01373 453871 or 01275 333623.
Personal allowances are increasing to £11,500 (unless income is greater than £100k). For higher earners the threshold for paying higher rates increases from £43,000 to £45,000.
For the self-employed, Class 2 NIC is being abolished from April 2018, and there was an indication that Class 4 NIC would be increasing from 9% to 11% although there has been a rather embarrassing u turn on this by the Government in the last few days.
The dividend-free tax allowance will be reducing from £5,000 to £2,000 from April 2018. The rate of 7.5% on dividends above this limit for basic rate tax payers remains the same (32.5% for higher rate, 38/1% for additional rate tax payers).
Capital Gains Tax annual exempt amount increased from £11,100 to £11,300. The rates remained the same, but are still a very attractive 10% up to the higher rate threshold and 20% above that (higher rates of 18% and 28% may apply to the disposal of certain residential property).
There are also some Inheritance Tax changes for extra allowances available on passing private residence to family members increasing the nil rate band from £325,000 to £425,000 in 2017/18 and up to £500,000 by 2020.
Company and Business issues
Some good news is that Corporation Tax is reducing from 20% to 19% in April 2017 and will drop down to 17% by 2020.
The VAT threshold increased from £83,000 to £85,000. There are fundamental changes to the Flat Rate Scheme with a new category for limited cost traders (those who spend less than 2% of sales on goods) increasing the rate to 16.5%. This will all but invalidate the scheme for the those that fall in this category (Consultants, IT workers etc.).
Administrative changes will be made to the R&D tax credits which will make it a more certain and simple process. If you are doing anything that involves an uncertain outcome then do find out more about these surprisingly helpful credits.
The Government did offer some support for businesses facing significant increases in bills following the business rates revaluation due to take effect from April 2017.
A new tax free childcare initiative will provide up to £2,000 a year in childcare support for each child under 12 for working parents. Parents will need to open an online account and for every 80p paid in the Government will then top up with an extra 20p.
The National Living Wage (for those 25 and over) increased again to £7.50 per hour (with corresponding rises for younger people on the National Minimum Wage).
The entry and exit thresholds for Cash Basis accounting increased to £150,000 and £300,000.
ISA limits increased by £4,760 to £20,000, and there is going to be a new Lifetime ISA to assist people with the purchase of their first home (up to £450k) or retirement – a qualifying individual can save £4,000 each year and will receive a 25% bonus from the government.
Making Tax Digital
There has been a lot of noise about ‘Making Tax Digital’ which is going to have a major impact on all businesses. In a nutshell it is likely to be a quarterly online reporting scheme and you will have to register, file, pay and update information online.
This will start to be rolled out from April 2018, however a concession was granted in the budget for unincorporated businesses and landlords turning over less than the VAT threshold who will have until 2019 to comply.