Budget 2017 – How does it affect you?

philip hammond autumn budget 2017

22 November 2017 16:05

In the second Budget of 2017, there were very few surprises, with many of the “positive” changes aimed at the younger generation and the housing market.

With ongoing uncertainty surrounding Brexit, the chancellor downgraded the previous growth forecast for 2017, from 2% to 1.5%, although he did predict borrowing will be lower than announced in March 2017.

He also announced £3bn will be set aside to help the UK prepare for every possible outcome as the UK leaves the EU.

So, what were the main Tax announcements?

Avoidance

In a bid to continue the crackdown on illegal (or should we say immoral?) tax planning, the government announced measures to discourage the use of certain schemes.

They have announced that the time limits for HMRC to assess offshore tax non-compliance will be increased to at least 12 years, with consultation on this starting in Spring 2018.

The government have also announced they will continue to tackle disguised remuneration used by close companies.

It seems the government is committed to having a competitive tax system, but clearly their aim is for everyone to pay their fair share. They announced a further £155m to address a range of avoidance and evasion activity.

Off-payroll workers (IR35)

The government reformed the off-payroll working rules for engagements in the public sector in April 2017. Hidden in the policy documents was a statement saying the “possible next step would be to extend the reforms to the private sector”, to ensure individuals who effectively work as employees are taxed as such……. watch this space, as further announcements will be published in 2018.

Income Tax / National Insurance

Personal Allowance

The personal allowance will rise to £11,850 in April 2018, and also the higher rate threshold will increase to £46,350 from 6 April 2018, moving closer to their commitment to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020.

Once the personal allowance reaches £12,500, it will rise in line with CPI along with the higher rate threshold.

Those with earnings over £100,000 will continue to lose £1 of their personal allowance for every £2 of earnings over £100,000.

National Insurance

There were no new announcements made in connection with National Insurance. For a reminder of previous announcements, please see our post on the Spring Budget 2017.

Dividend Allowance

A reminder that the tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018, with the aim being to reduce the tax differential between the self employed, and those who operate via their own limited company.

The reduction will also impact investors who have dividend income of over £2,000 (typically investments of over £50,000), meaning they will pay more tax, and perhaps be required to complete a self assessment tax return?

With the reduction, it is important that investors utilise ISA allowances, as dividends from ISA’s will remain tax free.

Capital Gains Tax

The 30 day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.

Corporation Tax

The corporate indexation allowance will be frozen from 1 January 2018, meaning no relief will be available for inflation accruing after this date.

In order to avoid losses of tax, with affect from April 2019, withholding tax obligations will be extended to royalty payments made to low or no tax jurisdictions in connection with sales to UK customers, and the rules applying regardless of where the payer is located.

The government will also consult in 2018 on the tax treatment of intellectual property, considering whether there is an economic case for change in this area. The aim so that it better supports UK companies investing in intellectual property.

Employment Tax

National Living Wage

The National Minimum and Living wage will increase from April 2018, as follows:

  • £7.83 per hour 25yrs and over

  • £7.38 per hour 21-24 yrs old

  • £5.90 per hour 18-20 yrs old

  • £4.20 per hour 16-17 yrs old

  • £3.70 per hour apprentices under 19, or in first year of employment

Benefit in Kind

After announcing significant investment into electric and driverless cars, the chancellor also confirmed that those employees using a charge point at their place of work will not suffer a benefit a kind.

Business Rates

As predicted, the planned switch in indexation from RPI to CPI will take place from 1 April 2018.

The government will also legislate to address the so-called “staircase tax”. Businesses will be asked to ask the Valuation Office Agency to revalue so that bills are based on previous practice, backdated to April 2010. This may be good news for those businesses who lost Small Business Rate relief.

The £1,000 discount for public house (with rateable value of up to £100,000) will also continue.

Finally, the revaluations of non-domestic properties will take place every three years, rather than currently every five years.

VAT

The VAT registration turnover threshold will remain at £85,000 for the next two years, from April 2018.

Although the government resisted the temptation to reduce the threshold, they have stated they will consult to ensure the current design of the system.

Capital Allowances

There were no new major changes to the current capital allowance regime.

SDLT

First time buyers of homes up to £500,000 will not pay Stamp Duty on the first £300,000, as from today.

The government say that 80% of people buying their first home will pay no stamp duty.

Lifetime ISA’s / ISA’s

The annual ISA limit will remain unchanged at £20,000 from 6 April 2018, though the subscription limit for Junior ISAs and Child Trust Funds will be increased to £4,260.

Inheritance Tax

There were no new announcements in relation to IHT. If IHT is of any concern to you, or you would like a reminder of the current regime, please do not hesitate to get in touch.

Duties / Insurance Premium Tax

Fuel duty will be frozen for an eighth year in 2018/19.

In a bid to improve our air quality, a Vehicle Excise Duty (VED) supplement will apply to new diesel cars from 1 April 2018, so that the VED will be calculated based on the VED banding above. However, this will not apply to the next generation of “clean diesels”.

Also, the Company Car tax diesel supplement of 3% will increase to 4% from 6 April 2018, effecting those employees with diesel company cars.

Welfare

Universal Credit

The government have announced measures to speed up the process of claimants receiving money, receiving more upfront support.

Households in need who qualify for UC will be able to access a month’s worth of support within 5 days of the claim, via an interest free advance, which can be repaid over 12 months.

Claimants will also be eligible from the first day of claim, rather than after 7 days.

Furthermore, in a move to avoid issues paying their rent (as heavily publicised), housing benefit claimants will continue to receive housing benefit for two weeks after the claim for UC.

Worried how the Budget will affect you? Then why not get in touch with one of our tax specialists?

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