As usual, certain elements of the budget, such as the move to have all schools become academies by 2022, were known before George Osborn's announcement today. But other announcements came as a surprise. The main ones being the new Sugar Levy and the new Lifetime ISA. It is worth remembering that a lot of budget changes had already been announced in Osborne's Emergency Budget last Summer.
How the new budget affects you
Any changes to Personal Tax Free Allowances and Personal Tax Thresholds announced today do not take affect until April 2017! Every year, tax payers get excited post budget day, expecting a welcome jump to the newly announced rates. Rate changes for the coming 2016/17 tax year were announced in the last budget.
Income Tax Changes
- The Personal Tax Free Allowance will increase in April 2017 from £11,000 to £11,500. +£500
- The figure at which you will cross into 40% tax territory will increase to £45,000. In 2016/17 it will be £43,000. +£200
National Insurance Change
- From April 2018 Class 2 NIC's will be abolished. Currently self-employed people pay Class 2 NIC at £2.80 per week if they make profits of more than £5,965 per year. They also pay Class 4 NICs if their profits are over £8,060 per year. After April 2018 they will only need to pay the Class 4 NIC's.
- National insurance will be applied to termination payments over £30,000 from 2018.
Capital Gains Tax Changes
- Reduction in CGT, starting next month, - 18% rate of CGT drops to 10% and the 28% rate of CGT to 20%. This does not apply to chargeable gains accruing on the disposal of residential property, other than your private residence. So if you are selling your family home, as long as it meets the criteria for the Private Residence Relief, closing after the 6th April next month could save you money in CGT! See here for more.
A big talking point of this budget has been the announcement of a new Sugar Levy on the soft drinks industry to be implemented in 2 years time. The levy will be calculated based on the sugar content of the drinks, with higher rates yielding higher levies. Milk drinks and natural fruit juices will not be levied.
- An expected, pre- announced move to take schools out of the hands of Local Council control by having all schools, both Secondary and Primary, become academies by 2022 was announced.
- Monies raised from the new Sugar Levy are to be used to pay for more sports in schools.
- Secondary Schools in England will have to bid for new funding for extra after-school activities like sport and art.
- An end to the 3.30pm school day finish as 25% of secondary schools to stay open after 15:30pm.
- Compulsory maths lessons until 18 years old.
- Focus on increasing the standards of Northern schools.
Alcohol, tobacco and fuel
- No change to Fuel duty
- No change to duty on beer, cider and spirits
- Tobacco duty increase by 2% on cigarettes, 3% on loose tobacco
- New £20,000 ISA threshold level, from this April. It has been £15,240.
- New Lifetime ISA available to those who are under 40 years old. Save a maximum of £4,000 towards a home deposit or retirement per year, and you will get a £1,000 top-up, from the state, every year until you turn 50. More info available here.
- New Government backed savings incentive for lower wage workers. It will be available to anyone in work and receiving universal credit or working tax credit. The Help to Save scheme will work by allowing savers to deposit £50 per month, and after two years, claim a 50 percent bonus -worth up to £600. After another two years they could get another £600 bonus. it will be worth up to £1,200 per person. Read more about the Help to Save initiative.
- Increase in contributions from public sector employers.
Changes relevant to Contractors/Employers/Companies/Businesses
- Corporation tax will reduce to 19% in 2017 and to 17% by 2020 ( it had previously been announced it would be 18%).
- The threshold for Small Business Rate Relief is to increase from £6,000 to £15,000, and the higher rate from £18,000 to £51,000.
- From tomorrow, Thursday, commercial stamp duty will be zero on properties up to £150,000; 2% on the next £200,000, and a top rate of 5% on £250,000+.
- The use of "personal service companies" by public sector employees in order to reduce tax liabilities was targeted and is to be stamped out. More here.
- Debt interest payments used by larger firms to cut corporation tax bills will be capped at 30% of earnings
Micro Businesses and Small Scale Entrepreneurs
From April 2017, two new tax-free £1,000 allowances, have been announced. One is for those who sell goods, for eg. crafts they make, or provide services, eg. lift share, will no longer have to pay tax on the first £1,00 a year they earn from these small scale businesses.
The second £1,000 incentive is for small scale letters, eg. those who rent a car parking space or a garage space. They two will not pay tax on the first £1,000 earned.
Other changes announced.
- A .5% increase to the Insurance Premium Tax, a tax on insurers. It will go from 9.5% to 10%, the money from which, will be used to fund new flood defences.
- £730m announced to be made available to back renewable energy businesses.