The Chancellor delivered the final Spring Budget and it is designed to be a Budget to put economic stability first following the political upheaval of the Brexit vote.
Updated: Friday 17th March 2017.
Here is a summary of the key tax measures:
- The personal allowance will increase to £11,500 for 2017/18, as previously announced.
- The higher rate threshold will increase to £45,000 for 2017/18. This will not apply to Scottish taxpayers where the basic rate threshold will remain at £43,000. This is the first occasion of a tax differential brought about by the devolved powers available to the Scottish Government.
Savings and Investments
- The increased ISA allowance of £20,000 comes into effect from 6th April 2017.
- The dividend allowance will continue to be £5,000 for the 2017/18 tax year. However, it was announced that this will reduce to £2,000 with effect from 6th April 2018 (i.e. the 2018/19 tax year).
- HMRC have confirmed changes will be made to salary sacrifice arrangements. With effect from 6th April 2017, the income tax and National Insurance benefits of entering into these arrangements will be removed.
- From April 2018, the government will tighten the rules around the income tax treatment of termination payments to prevent manipulation of the £30,000 exemption. From the same date, termination payments in excess of £30,000 will be liable for employer’s and employee’s National Insurance Contributions. These sums are already subject to income tax.
- The corporation tax rate will be reduced to 17% from 2020. The rate is currently 20% and is already scheduled to reduce to 19% from 2017.
- The loss relief rules for companies will be modernized to allow for more flexible use of business losses. From 1st April 2017, companies will be able to use brought forward trading losses against profits and income from other sources and/or against profits and income arising in other group companies. However, from the same date, loss relief will be restricted for companies with taxable profits in excess of £5 million – losses brought forward will only be able to be offset against 50% of the profits in excess of £5 million.
- New rules will cap the tax relief for interest paid by companies to 30% of its taxable UK earnings or on a net interest to earnings ratio for a worldwide group.
- Class II National Insurance will be abolished from 6th April 2018.
The Chancellor had announced, as part of the review of the tax differential created by choosing to operate your business as self-employed or as a partnership, the implementation of new legislation to bring about an increase in the rate of Class IV National Insurance payable by a self-employed individual would be implemented. It was intended that the rates would increase by 1% from 6th April 2018 (increased to 10%) with a further 1% increase from 6th April 2019 (increased to 11%). However, in a major U-turn these planned increases have been scrapped and the Class IV National Insurance rate will continue to be 9% for profits up to the upper profits limit.
Making Tax Digital
- The making tax digital process is carrying on at pace. However, HMRC announced a delay in the implementation of quarterly reporting for unincorporated businesses and landlords with turnover beneath the VAT threshold (which is currently £83,000) to April 2019; a one year delay for those affected.
- In order to make the transition to a digital process easier, a simplified and extended cash basis will be introduced for unincorporated businesses. Such businesses with turnover not exceeding £150,000 can calculate their profits using the cash basis, giving more certainty as to when income and expenses are being recognised. The maximum limit, where the cash basis can no longer be used, will also change to £300,000 (an increase from the current limit of twice the VAT threshold).