Chancellor Philip Hammond (aka “Spreadsheet Phil”) has delivered his first Budget, which was also the last to be held during Spring as it will now move to Autumn. It means that this year there will be a second Budget to accommodate the timetable switch.
As expected, there will be no “soft landing” for the changes to IR35 announced in the Autumn Statement. The reforms to so-called “off payroll working” were not mentioned by the Chancellor in his speech, however the Budget policy paper confirms the measures will go ahead from April 2017.
Here is a summary of the key points:
From April 2017: new announcements
· Package of measures to give some relief to those small businesses particularly badly affected by business rates revaluation.
· Threshold for simplified ‘cash basis’ accounting for self-employed businesses raised from VAT registration threshold to £150,000 for 2017/18, and extended to landlords.
From April 2017: previously announced
· Income Tax rates and allowances confirmed as announced at Budget 2016: tax-free personal allowance will be £11,500, threshold for 40% tax will be £45,000.
· National Insurance thresholds for employers and employees made consistent at £157 per week.
· Tax and National Insurance advantages of ‘salary sacrifice’ schemes withdrawn, apart from arrangements involving pensions, childcare, Cycle to Work and ultra-low emission cars.
· New £1,000 tax-free allowances for trading and property income apply for 2017/18 tax year.
· New tax-free childcare arrangements to be introduced on a trial basis and rolled out to all taxpayers over the coming year.
· Tax advantages of foreign domiciled status will be lost for those resident in the UK for 15 of the last 20 years, and UK property held by a foreign domiciled individual through offshore structures becomes chargeable to Inheritance Tax.
· ISA investment limit rises from £15,240 to £20,000 per year, of which £4,000 can be in the new ‘lifetime ISA’.
· Public sector employers become responsible for tax due from individuals working for them through personal service companies and similar arrangements where there is an underlying employment relationship.
· Limit on pension contributions for those who have already made a flexible income drawdown from a money purchase pension scheme will fall from £10,000 per year to £4,000 per year. Limit for those who have not made such a drawdown remains £40,000.
· Main rate of Corporation Tax falls to 19% from 1 April 2017.
· Benefit of VAT Flat Rate Scheme almost completely withdrawn for businesses spending less than 2% of their turnover or less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel.
· Reforms to restrict interest relief and amend the rules for brought forward losses for corporation tax.
· From 1 June 2017, Insurance Premium Tax rises from 10% to 12%.
April 2018: new announcements
· ‘Making Tax Digital’ reforms require businesses and landlords with turnover above the VAT registration threshold (£85,000 for 2017/18) to make quarterly online reports updating their tax position; businesses below the threshold will not be affected until April 2019 (when turnover threshold will be £10,000).
· Class 4 National Insurance Contributions rate on profits between lower threshold and upper limit (for 2017/18: £8,164 to £45,000) rises from 9% to 10% (and from 10% to 11% in April 2019). Editor’s note: Since this article was first published the Chancellor has announced that this measure has been dropped.
· Nil rate band for dividend income, introduced at £5,000 for tax year 2016/17, reduced to £2,000 for 2018/19.
April 2018: previously announced
· Class 2 National Insurance Contributions for self-employed abolished.
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