Spring Budget 2017

The Spring Budget 2017 delivered by Chancellor Philip Hammond has been described as a budget to:- “take forward our plan to prepare Britain for a brighter future”.

Spring Budget 2017The economic predictions made in the Autumn Statement last year were similar to those given by the Office for Budget Responsibility (OBR).
It is predicted that inflation will rise by 2.4% this year, 2.3% in 2018 and 2% the year after that.

UK Growth is expected to be 2% this year (this figure has been revised upwards from the 1.4% forecast given in the Autumn Statement last year) and growth is expected to be 1.6% the year after.

The level of borrowing for 2016/17 is predicted to be £51.7 billion (This is £16.4 billion lower than was thought in the Autumn Statement last year) and public sector net borrowing is expected to fall from the 3.8% of Gross Domestic Product (GDP) last year to 2.6% in 2017.

This year’s Spring Budget 2017 had a few new measures, but most of the announcements only come into effect next year.

It was confirmed by the Chancellor that from April this year:

  • there will be a rise in the national living wage to £7.50/hour
  • there will be a rise in the personal allowance to £11,500 and the threshold for paying higher rate tax rose to £45,000 (£43,000 in Scotland)
  • a new NS&I bond was introduced which pays savers a rate of 2.2% on deposits of up to £3,000.

A summary of the main features of the Spring Budget report 2017 is given below.

Spring Budget 2017 At A Glance

Making Tax Digital

Businesses who have a turnover below the threshold for VAT do not need to start quarterly reporting for another year.

T-Levels

A new qualification was introduced, called T-Levels,  for technical courses.

R&D Tax Credits

New measures were put in place to reduce admin.

Business Rates

Firms in England that were coming off the small business rate relief would see a cap on their business rates bill.

Self-Employed NICS

NICs(Class 4) are set to rise to 10% in April 2018 and 11% in April 2019.

Dividend Allowance

Tax-free dividend allowance has been lowered from the current £5000 to £2,000 from next April.

Business Rates For Pubs

In England, there will be a discount of £1000 on business rates.

Tax Avoidance

New measures were put in place to stop companies converting capital losses into trading losses.

Soft Drinks Levy

The rates were set at 18p for the main band and set at 24p for the higher band.

Corporation tax

It was confirmed that the rates already made public would be adhered to with corporation tax going down to 19% from this April & then down further to 17% by 2020.

Making tax digital

There is a new delayed deadline of April 2019 for mandatory making tax digital, for unincorporated businesses & landlords that have an annual turnover below the VAT threshold.

MTD will require businesses to use digital software to keep tax records and update HMRC on a quarterly basis. 

Businesses, self-employed people & landlords will be required to start using the new digital service from:

  • April 2018, if they have profits chargeable to income tax & pay class 4 national insurance contributions (NICs) and their turnovers, are more than the VAT threshold
  • April 2019, if they have profits chargeable to income tax & pay class 4 NICs and their turnovers, are below the VAT threshold (as above)
  • April 2019 if they are registered for & pay VAT
  • from April 2020 if they pay corporation tax 

Businesses, self-employed people & landlords with turnovers of less than £10,000 per annum are exempt from these requirements.

Cash basis entry threshold

From April this year, the threshold for cash entry is set to rise from £83,000 to £150,000.

Cash accounting is optional, but offers a more basic method for calculating & reporting taxable profits for qualifying trading businesses.

Off-payroll individuals working in public sector

The rules surrounding individuals working for public sector organisations through their own Ltd company, such as doctors, nurses and teachers, will change from April this year.

The ‘off-payroll’ rules will mean that where an off-payroll worker is engaged by a public sector body, that organisation is required to deduct and pay tax and NICs to HMRC.

There was a 5% allowance in place for administering the rules, but this will be removed for people who work in the public sector.

Appropriations into stock

A new measure for corporation tax and income tax will prevent an election being made for appropriations of a capital asset into trading stock made on or after 8th March 2017.

The purpose is to prevent businesses converting losses attributable to a period for which the asset was a capital asset into more flexible trading losses. The legislation will only permit this election to be made where the appropriation at market value into trading stock would give rise to a chargeable gain and not where it gives rise to an allowable loss.

Hybrid and other mismatches

Two minor retrospective changes to the hybrid and mismatch regime came into effect on 1 January 2017. The first change removes the need to make a formal claim about the permitted period rules, which deal with mismatches involving financial instruments.

The second change provides that deductions for amortisation are not treated as relevant deductions about the legislative requirements.

Research and development

The government will make administrative changes to the research and development (R&D) expenditure credit to raise certainty and simplicity around claims and will take action to improve awareness of R&D tax credits among SMEs.

Business rates

The adverse effect of the changes to the rates revaluation in England in April 2017 on some businesses may be reduced in certain circumstances. The measures include:

  • support for small businesses losing small business rate relief to limit rises in their bills to the greater of £600 or the real term transitional relief cap for small businesses each year
  • providing English local authorities with funding to support discretionary relief, to allow them to give support to individual hardship cases in their local areas
  • a £1,000 business rate discount for pubs with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1st April 2017.

Disposals of land in the UK

Legislation will be introduced in Finance Bill 2017 to ensure that all profits arising from the dealing or development of land recognised in the accounts on or after 8th March 2017 will be taxed, regardless of the contract date. Previously the rule only applied to contracts entered into on or after 5 July 2016.

Sugar drinks industry levy

The levy rate for added sugar drinks will be set at 18p per litre for drinks with a total sugar content of 5-7g, per 100ml, and 24p per litre for those with a total sugar content of 8g or more, per 100ml.

Spring Budget 2017 – Personal

Personal allowance

From 6 April 2017, the tax-free personal allowance will rise to £11,500. The higher rate threshold will rise to £45,000 except in Scotland where it remains at £ 43,000.

National insurance contributions

With class 2 national insurance contributions (NICs) due to be abolished in April 2018, class 4 NICs are to rise from 9% to 10% in April 2018 and then from 10% to 11% in April 2019.

The intention of this change is to move toward equalising the payments made by the self-employed when compared with those who are employed.

However, it is expected that only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.

The government will look further to see if it considers there is a greater case for consistency in parental benefits between the employed and self -employed.

Dividend allowance

The £5,000 tax-free dividend allowance, introduced in April 2016, is to be reduced to £2,000 from 6th April 2018.

Capital gains tax

The annual capital gains tax exemption rises by £200 to £11,300.

Inheritance tax

There were no new announcements regarding inheritance tax. The new residence nil-rate band limit is available from 6 April 2017 at a rate of £100,000.

Talk to our Warrington Financial Advisor, Liverpool Financial Adviser, Wilmslow Financial Advisor, West Kirby Financial Advisor, Altrincham Financial Advisor or Manchester Financial Adviser team today about self-employment.

Spring Budget 2017 – Duties

Vehicle excise duty

From 1st April 2017 the vehicle excise duty (VED) rates for cars, vans and motorcycles registered before that date rises in line with the retail price index (RPI).   VED is paid on vehicle ownership, and rates are dependent on the type of vehicle and the first date of registration.

HGV vehicle excise duty and road user levy

There will be no change in HGV VED and road user levy rates.

Air passenger duty

Air passenger duty rates rises in line with the RPI from 1 April 2018 as follows:

Bands (distance in miles from London)

Reduced rate (lowest class of travel)

Standard rate

Higher rate

Band A (0-2000 miles)

£13

£26

£78

Band B (over 2000 miles)

£78

£156

£468

An announcement about the applicable rates from 1 April 2019 will be made at Autumn Budget 2017.

Alcohol duties

From 13th March 2017, the duty rates on alcohol will rise in line with the RPI. The increases in cost is reported to be as:

  • a pint of beer – 2p
  • a pint of cider – 1p
  • bottle of Scotch whisky – 36p
  • bottle of wine – 10p.

Tobacco duty rates

All tobacco product duty rates rise with effect from 8 March 2017 by 2% above RPI inflation.

Gaming duty

Gaming duty bands rise in line with inflation for gaming duty periods starting on or after 1st April 2017.

Cigarette duty

From 20th May 2017, there will be a minimum excise tax on cigarettes. This is intended to target the cheapest tobacco. The rate is £268.63 per 1,000 cigarettes.

Aggregates levy

The aggregates levy for 2017/18 will remain at £2 per tonne.

Stamp duty land tax

Following consultation, the government is to delay the reduction in the stamp duty land tax filing and payment window until 2018/19.

Savings and pensions

Money purchase annual allowance

The money purchase annual allowance (MPAA) will reduce from £10,000 to £4,000 from 6 April 2017.

There will be no changes to how the MPAA will operate or how it is calculated and the transitional provision for the 2015/16 tax year unchanged.

Any unused MPAA cannot be carried forward for later years.

Qualifying overseas pension schemes

Transfers to qualifying recognised overseas pension schemes (QROPS) requested on or after 9th March 2017 are to be taxable. This won’t apply if at the point of transfer both the individual and the pension savings are in the same country and both are within the European Economic Area, or the QROPS is provided by the individual’s employer.

If this is not the case, a 25% tax charge on the transfer will apply before the transfer is made.

Lifetime ISA

The Lifetime ISA will be available to individuals aged between 18 and 40 from 6th April 2017. The Lifetime ISA allows for savings of up to £4,000 per annum up to the age of 50. There is an entitlement of a 25% bonus of up to £1,000 from the government each year.

Withdrawals can be made without penalty if the funds are used to purchase a first home or for any reason after the age of 60. Withdrawals before age 60 for another reason will incur a charge that will adequately repay the government’s bonus, plus an additional charge.

NS&I Investment Bond

A new NS&I Investment Bond will become available for 12 months from April 2017.

This bond will be available for all those aged 16 or over and is subject to a minimum investment of £100 & a maximum of £3,000. The bond will attract a 2.2% interest rate over a term of 3 years.

Spring Budget 2017 – VAT

Registration and deregistration thresholds

The taxable turnover threshold, which requires a person to register for VAT, rises from £83,000 to £85,000 per annum.

The threshold below which a VAT-registered person may apply to deregister rises from £81,000 to £83,000 per annum & the relevant registration & deregistration threshold for Intra-Community acquisitions will also rises from £83,000 to £85,000 per annum.

All these changes will take effect from 1st April 2017 and will prevent around 4,000 businesses from having to register in the financial year 2017 to 2018.

VAT Rates

The positive rates of VAT are unchanged, so the standard rate remains at the current 20% and the reduced rate at 5%.

Split payments model

The government has continued to consider introducing alternative methods of collecting VAT where existing methods have been abused. This is in addition to the measures it has already introduced to address the problem of overseas businesses selling goods to UK consumers via online marketplaces without paying VAT.

On 20th March 2017, the government will publish a call for evidence regarding the case for a new, safer method of collecting VAT relating to online sales. The method will make use of technology to take the VAT out of such transactions at the point of purchase. This type of arrangement is known as split payments.

Consumer mobile phone services

The current use and enjoyment provision for mobile phone services used by consumers will be removed.

The new measure will ensure that services used outside the EU are brought within the scope of VAT. Furthermore, mobile phone companies will no longer be able to use the inconsistency to avoid UK VAT. This will bring UK VAT rules in line with the internationally agreed approach.

Fraud in the construction se ctor

The government has announced that on 20th March 2017, it will publish a consultation document on a range of policy options to address fraudulent activity relating to the supply of labour in the construction industry.

Possibilities could include introducing a reverse charge (operating in the same way as services bought in from abroad) requiring the recipient of the services to account for the VAT. The qualifying criteria for gross payment status within the Construction Industry Scheme will also be reconsidered.

The objective of any changes would be to strike a balance between effective targeting, simplicity and minimal impact on businesses, at the same time as eradicating the likelihood of fraud as much as possible.

Penalties in fraud cases

In Autumn Statement 2016, it was announced that a new penalty for cases of fraud would be introduced in Finance Bill 2017. That has now been confirmed.

A consultation process followed the issue of draft legislation and as a result, some minor changes have been made for clarity and also to limit the naming of a company officer to cases where the amount of tax due exceeds £25,000.

The new penalty will take effect once the Finance Bill receives Royal Assent.

Flat rate scheme

With effect from 1st April 2017, businesses eligible to use the flat rate scheme but which are classified as ‘limited cost’ businesses, will have to account for VAT at 16.5% of their relevant gross turnover.

A ‘limited cost’ company is one who spends the following on relevant goods:

  • less than 2% of its VAT flat rate turnover, or
  • greater than 2% of its VAT flat rate turnover but less than £1,000 per year.

Relevant goods or products are those which are used exclusively for business purposes, but exclude the following:

  • vehicle costs including fuel, unless the business is operating in the transport sector using its own, or a leased vehicle
  • food or drink for the company or its staff
  • capital expenditure goods of any value
  • products for resale, leasing, letting or hiring out if the primary business activity is not ordinarily the selling, leasing, letting or hiring out of such goods
  • products for re-selling or hiring out, unless selling or hiring is the primary business activity.

The measure is designed to ensure fairness of treatment for businesses which are considered to be receiving an unfair advantage from the classification and rate they currently use.

Notice 733 provides guidance on the transitional rules for those operating the basic turnover method or the cash based turnover method at paragraphs 8.2 and 9.7 respectively in that it explains the treatment for invoices issued or payment received after 23rd November 2016 and before 1st April 2017. Those whose returns straddle 1st April will have to split their accounting between the old and new rates.

If in any period, the cost of relevant goods is more than the ‘limited value’ threshold, the business may use the normal flat rate scheme percentage for that period.

Other announcements in this Spring 2017 budget were:-

Tax avoidance schemes clampdown

A change in the legislation which came into effect on 8th March 2017 is intended to ensure that those found to be promoters of tax avoidance schemes cannot circumvent the promoters of tax avoidance schemes regime by re-organising their business interests so that they either share control of a promoting business or put a person or persons between themselves and the promoting business.

This is achieved by introducing the term ‘significant influence’ into the control definition of the Finance Act 2014.

T-levels

Plans were announced during this budget to provide a rise in the number of training hours for 16-19 year-olds on technical routes by more than 50% to over 900 hours on average a year, including the completion of a high-quality industry work placement during the programme.

Insurance premium tax

The standard rate of insurance premium tax is to rise from 10% to 12% from 1st June 2017.

Tax credit debt

The DWP (Department for Work and Pensions) will seek to recover HMRC tax credit debt using its existing powers including the use of direct earnings attachment.

Benefit fraud and error

The DWP(Department for Work and Pensions) is to work with an external data provider with a view to better identify fraud and error caused by undeclared partners.

Talk to our Warrington IFA, Manchester IFAAltrincham IFAWilmslow IFA, Liverpool IFA or Knutsford IFA team about how the Spring 2017 budget will impact you and your family.

Important Information About This Spring Budget 2017 Article

The way in which tax charges (or tax relief, as appropriate) are applied depends on a person’s individual circumstances and may be subject to change in the future. The info in this article is based on our own understanding of the Spring Budget 2017, in respect of which specific implementation details may change when the final legislation & supporting documentation are published.

This Spring Budget 2017 document is solely for information purposes and nothing in this Spring Budget 2017 document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content.

While considerable care and attention has been taken to ensure that the info contained in this Spring Budget 2017 document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any info.

 

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