The Chancellor of the Exchequer, Philip Hammond, delivered his first Budget against a backdrop of a more-buoyant-than-expected UK economy post-Brexit and improved tax receipts. Set against these were concerns about funding the NHS and social care, and the impact on business from changes to business rates.
Here are some of the key tax and related announcements in the Budget:
- Self-employed workers will see their Class 4 national insurance contributions (NICs) increase by 1% to 10% in April 2018, with a further percentage point rise to 11% from April 2019. The government had previously announced that Class 2 NICs will be abolished from April 2018.
- The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
- The individual savings account (ISA) allowance will rise to £20,000 in April 2017 as previously announced.
- The new NS&I investment bond available for 12 months from April 2017 will pay 2.2% over a three-year term on deposits of up to £3,000.
- As already announced, the personal allowance will rise to £11,500 in April 2017 and to £12,500 by 2020 and the higher rate income threshold will rise to £45,000. Special rules will apply in Scotland.
- The Chancellor confirmed that corporation tax will be cut to a rate of 19% from April 2017 and that the rate will be further reduced to 17% in 2020.Businesses losing their Small Business Rate Relief will benefit from a cap on increases in their rates bill.
- The government has announced it will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings.
- Unincorporated businesses and landlords with a turnover below the VAT threshold will have an extra year, until April 2019, before they have to implement ‘Making Tax Digital’.
- The government will introduce a 25% charge on transfers to qualifying recognised overseas pension schemes or QROPS. There will exemptions from the charge for people with a genuine need to transfer their pensions overseas.
The Chancellor’s Budget speech contained many references to ‘fairness’. The decision to raise NICs for the self-employed was widely trailed but the cut in the dividend allowance came as a surprise.