The Chancellor’s Budget on 8 March was the first of two due in 2017. The final spring Budget came little more than three months after an Autumn Statement that suggested government finances had taken a post-referendum turn for the worse. However, the latest short-term economic numbers turned out much better than the Office for Budgetary Responsibility’s (OBR’s) November projections.
This good news gave the Chancellor a little ‘wriggle room’, but instead he chose to offset some modest increases in spending – mostly focused on social care – with tax and NIC rises mainly aimed at the self-employed. For once, the volume of Budget documents issued by the Treasury shrank significantly, but there were still some surprises to be found in the detail.
One example was the move to levy a 25% tax charge from 9 March 2017 on most transfers to qualifying recognised overseas pension schemes (QROPS), even though the Autumn Statement had announced a tightening of the QROPS rules. The cut in the dividend allowance from 2018/19 was also unexpected and catches not just the target one-person companies. Personal investors with equity-based portfolios worth more than about £60,000 (based on current UK dividend yields) will pay more tax. Ironically one effect will be to increase the appeal of ISAs, which benefit from a large contribution limit rise next month.
The Chancellor resisted making any announcements about future increases to the personal allowance or higher rate threshold, presumably saving some good news for his autumn set piece.