It was a low key, no surprises budget. Most changes to personal taxation had already been announced. The Self Employed were once again in the spotlight with NIC contributions rising, and a further reduction in the Dividend Tax. Below are the key areas where changes were announced:
As expected, the Personal Tax Free Allowance will be £11,500 for basic rate tax payers from April 6th 2017.
The main changes announced today in personal taxation, are only relevant if you are self employed. In a previous Philip Hammond Budget announcement in October 2016, he came down hard on salary sacrifice schemes. This time it's Dividends and NIC's. The only positive side for the self employed is the upcoming changes to childcare means they can access tax free childcare (assuming you've got children), see below for childcare changes.
Dividend Tax: Company directors and private shareholders will have their tax-free allowance on dividends cut from £5,000 to £2,000 from April 2018.
National Insurance Contributions: Hammond confirmed Osborne's plan to abolish Class 2 NIC's. At the same time he announced that Class 4 NIC's paid by the self employed with profits of over £8,060 a year, will increase by 1% to 10% from April 2018, and to 11% in 2019.
The long awaited Childcare announcements have been made.
- From September 2017, free childcare hours for working families with three and four-year-old's, will double from 15 to 30 a week in England.
- Tax free childcare to be extended to include those who are self employed. The tax free system in place up until now has been through Childcare Vouchers, offered by ones employer, taking payment for Childcare from pre- tax earnings. This offers a gain of £300 per £1,000 spent on childcare. However, until now, it was not available to the Self Employed. From April 2017 it will be. In families where both parents are working, savings can be lodged in a specific account, set up through www.gov.uk. For every £8,000 saved, per child, towards Childcare costs, the Government will top up the account by £2,000. Details to be found in the gov.uk article about ten things about tax free childcare parents should know.
More measures to crack down on businesses (this may impact contractor's) using, and abusing, loopholes within the system for the purpose of tax avoidance, were announced.
1. New financial penalty for professionals who create schemes defeated by HMRC in court.
2. Stop businesses converting capital losses into trading losses.
A new Government backed Savings Bond (NS&I) from April those over 16 years old, can earn an expected 2.2% AER interest for three years on a maximum £3,000 saving. This means savers will be able to earn a maximum of £66 interest a year from the bond.
National Living Wage
A 30p increase in the National Living Wage was announced today. The Government has previously said it plans to raise the National Living Wage to £9 per hour by 2020.
|NATIONAL LIVING WAGE||NATIONAL MINIMUM WAGE*|
|Age 25+||Age 21-24||Age 18-20||Age under 18||Apprentice|
|From April 2017:||£7.50||£6.95||£5.55||£4.00||£3.40|
Universal Credit Taper Rate Reduced
The previously announced reduction to the Universal Taper Rate was confirmed today. At present, those on Universal Credit have their benefit reduced gradually, once they earn over a certain work allowance figure, which changes, depending on which welfare payments they are in receipt of. Once over this work allowance figure, their Universal Credit is reduced by 65%, meaning they lose 65p of every £1 they earn over the allowance threshold. After April, Hammond has announced that this taper rate will fall to 63%, meaning an increase of 2p for every pound earned over the allowance figure.
There is a freeze on fuel duty for the moment, so no need to rush the pumps just yet.
Small Businesses - Rates and Taxation changes
Some relief has been announced to help those Small Businesses reeling with the impending rate increases of, in some cases, over 400%.
- Local Authorities will be given a £300 million fund to help struggling businesses, by delivering discretionary relief on rates.
- Any business coming out of small business rate relief will not see their bill increase by more than £50 a month, and subsequent increases will be capped.
- For businesses below the VAT threshold, there will be a delay by a year to the introduction of making quarterly returns.
- Pubs to get a £1,000 discount on business rates, for those with a ratable value less than £100,000 (90% of pubs) .
- The new Sugar Tax will bring in less revenue than expected as manufacturers were quick to reduce sugar levels, or replace with alternatives. The Sugar Tax will be set at 18p and 24p per litre for the main and higher bands (more than 5g of sugar per 100ml and more than 8g per 100ml respectively). Proceeds will go to the Department for Education to fund sports for children.
- Social Care Funding. An additional £2bn for adult social care in England over the next three years, with £1bn available for 2017-18, has been announced. The hope is this will help free up hospital beds for the NHS.
- NHS: GP Triage services to be introduced. Injection of £100m capital funding for new triage projects at English hospitals that should be ready in time for next winter. This measure will hopefully lesson the pressure on, and waiting times in, A&E departments in hospitals.
- Funding of £320m for 110 new free schools, including specialist Maths Schools.
- Free school transport extended to children, qualifying to receive free school meals, at selected schools.
- Introduction of T-levels – technical qualifications, an alternative to A-levels – for 16 to 19-year-old's.
Check out the full 2017/18 tax rates and tables in our handy guide.