Spring Budget 2017 Highlights
How does it affect you?
- Personal Allowance
As previously confirmed, from 6 April 2017 the Income Tax personal allowance will increase to £11,500 and the higher rate tax threshold will rise to £45,000, except in Scotland where it will remain at £43,000. The chancellor has reaffirmed the government’s commitment to raising the Income Tax personal allowance to £12,500, and the higher rate tax threshold to £50,000, by the end of this parliament. The 0% starting rate band for savings income will remain at £5,000 for the 2017/18 tax year.
- Dividend Allowance
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. This will reduce the tax difference between the self-employed and those working through a company.
- National Insurance
The main rate of National Insurance (NIC) contributions for self-employed will increase from 9% to 10% in April 2018, and to 11% in April 2019. The chancellor confirmed the abolition of Class 2 NICs – a flat-rate charge on the self-employed – from April 2018. Taken together with the increase in Class 4 NICs, this means that self-employed individuals with profits above £16,250 will have to pay more NICs.
- Capital Gains Tax
The annual exempt amount (AEA) for individuals and personal representatives will rise to £11,300 for 2017/18, while the annual exemption for trustees is therefore £5,650. For individuals the flat rate of capital gains tax applies to gains in excess of annual exemption is 10% up to the higher rate tax threshold (£32,000). Gains in excess of this are chargeable at 20%. CGT on sale of additional residential property is 28%.
Gains eligible for Entrepreneur’s relief and Investors relief are taxed at effective rate of 10%. The limit is £10m for each of the two reliefs.
- Corporation Tax
As previously announced, the rate of corporation tax will fall to 19% from April 2017 and to 17% in 2020.
- Research and Development tax review
There will be administrative changes to the research and development (R&D) expenditure credit to increase the certainty and simplicity around claims and improve awareness of R&D tax credits among SMEs.
- Inheritance Tax
IHT is payable on assets such as property, money and possessions that are passed on when you die. Tax is 40% on assets that exceed the threshold (the nil-rate band) which is currently at £325,000. From April 2017 each person will have a family home allowance of £100,000 in addition to the existing IHT threshold.
- Pension Allowances
The annual allowance for 2017/18 is £40,000. Pension funding that exceeds the annual allowance in a tax year can be offset against any unused annual allowance from the previous 3 tax years. The standard lifetime allowance from 6 April 2017 is £1m. From April 2018 it will be increased in line with the Consumer Price Index.
- Lifetime ISA
Lifetime ISA will be available from 6 April 2017. This allows younger adults to save up to £4,000 each year and receive a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
- ISA/Junior ISA
ISA limit will increase to £20,000 from 6 April 2017. The junior ISA limit will increase to £4,128.
- NS&I Investment Bond
The Government announced that a new NS&I bond will be available to everyone aged 16 and over with the flexibility to save between £100 and £3,000 over three years. The rate of interest is 2.2% for three years term.
- Stamp Duty Taxes
The SDLT supplement of 3% on purchase of additional residential properties above £40,000 will remain in place. The supplement is applicable on the whole purchase price not just on excess of £40,000.
The VAT registration threshold will increase to £85,000 from 1 April 2017. The standard rate of VAT remains at 20%.
- Making Tax Digital – delayed by one year
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory.
A detailed budget report will soon be published on our website.
Should you wish to discuss any of the changes that may impact your tax planning, do not hesitate to contact us.