Phillip Hammond delivered his first Budget as Chancellor yesterday in what is likely to be the final Budget before the UK gives notice of its departure from the EU by triggering Article 50. When doing so he announced that growth was expected to be higher than the previous forecast with an expected growth of 2% in 2017. His other announcements included:
The Spring budget was very light on substance for private client practitioners indicating that the Chancellor could be leaving more important policy announcements for the Autumn budget. The Chancellors speech contained little personal tax announcements. However, the consultation which is due to be released on 20 March 2017, is likely to impact private client practitioners when the government will be seeking to extend the scope of corporation tax to non-UK resident companies where they are currently subject to income tax and non-resident capital gains tax.
In the lead, up to the announcement HMRC had confirmed the government’s intention to reduce the time period for the filing of SDLT. However, The Chancellor announced that it is going to delay the reduction of the filing and payment window until 2018/2019.
In relation to offshore property developers it was announced that sections 76-80 of the Finance Act 2016 were to be amended to ensure that as of 8 March 2017, all profits realised by offshore developers, developing in the UK would be subject to tax.
The government confirmed its intention to lower the Corporation Tax Rate from 19% from April 2017 and 17% by 2020. In his speech, the Chancellor confirmed that from April 6, this year the "personal allowance", currently £11,000, will rise to £11,500. The result is that hundreds of thousands of people, including many pensioners, will be taken outside income tax altogether. In addition, it was announced that the CGT annual exemption will rise from £11,000 in 2016-17 to £11,300 in 2017-18. However, one of the biggest money raising measures announced was the reduction in the amount shareholders and directors can receive in dividends without paying tax with the amount reduced from £5,000 to £2,000.
The self-employed in "Class 4" NI contributions will also be paying more tax from April 2018 – the rate will rise by 1 percentage point to 10%, the Chancellor announced. In April 2019, the rate will rise again, to 11%. In contrast to employed workers, who pay "Class 1" NI at 12% on earnings between £8,164 and £45,000. As with the self-employed, they pay 2% on earnings above £45,000.
When delivering his speech, the Chancellor said that all self-employed people earning less than £16,250 will pay less in NI as a result of the changes.
An Increase to minimum wage
It was announced that the National Living Wage is to rise by 4% from £7.20 to £7.50 an hour in order to boost the National Living Wage to the amount set by George Osbourne to £9 by 2020. However, despite the increase there is still a large gap between the Government minimum and our real Living Wage of £8.45 in the UK and £9.75 in London, which is based on what families need to earn to meet everyday costs.
Measures to alleviate the pressures on small businesses
In the lead, up to the Budget, business had been seeking for further relief from the predicted hardship of the re-evaluation of business rates that is due to take place on 1 April. As such The Chancellor announced three principles measures to alleviate the pressures on Britain’s Businesses:
- Small businesses were to be given the benefit of a £50 cap per month on the increased rates payable;
- 90% of pubs would receive a discount of £1,000
- Along with a £300 million to local authorities as a discretionary fund for businesses in their area that would be hit hard by the increase in business rates.
The package is expected to cost the government £435 million however when considering this in detail this provides little comfort with the overall cuts amounting to less than 2% of the total revenue from Business Rates. As such small businesses, would be wise to take financial advice on their future cash flow whilst these measures are in place, given the fact that they are unlikely to permanent.
Transport spending comprising of £90 Million to the North and £23 Million to the Midlands. In addition, a further £690 Million will be allocated to local authorities to tackle urban congestion and to support local transport networks.
School maintenance comprising of £320 million on 140 new free schools and £216 million is to be spent o help rebuild and refurbish existing schools.
Rent a room relief
The government has announced that it will consult on proposals to redesign rent a room relief. No timeframe for the consultation or any proposed legislative changes is given.
The government believes that the relief, which is available to individuals who rent out furnished accommodation in their only or main residence and is intended to improve the supply of affordable, long-term lodgings, should be better targeted at long term lettings.