Chancellor Phillip Hammond delivered his first and last Spring budget on Wednesday of this week. In future, budgets will be delivered in the Autumn and so we have another one to look forward to later in 2017! This was also the first budget since the historic Brexit vote in June 2016 and it is clear that the immediate implications on the UK economy have not been as dire as was feared in the immediate aftermath of the vote. In his Autumn statement the Chancellor predicted that the UK deficit in the 2016/17 year may run as high as £68bn. His latest prediction on Wednesday was that this will now be “only” £51bn.
However, he was not tempted to use this to create a “giveaway” budget. Rather, he appears to be anticipating a large exit charge being imposed by the EU and has taken the opportunity to raise taxes in certain areas to build up some reserves to pay this charge. Unfortunately, some of these measures are likely to affect almost all of our clients who are either self-employed or shareholders in their own limited companies.
The headline changes announced this week were as follows;
- Class 4 National Insurance paid by those in self-employment is to increase in 2018 from 9% to 10% and then again in 2019 to 11%. This will bring the national insurance paid by those in self-employment very close to that paid by those in employment (12%).
- The annual Dividend Allowance is being reduced in 2018 from £5,000 to £2,000. This will cost basic rate tax payers an additional £225 per annum and higher rate tax payers £975 per annum.
- We received confirmation that the corporation tax rate will fall to 19% in April 2017 and remain at this level until April 2020 when it will fall further to 17%. It is worth remembering that as recently as 2010 the main rate of corporation tax in the UK was 28%.
- From 2018 all payments in lieu of notice (PILON’s) will be subjected to income tax and Class 1 National Insurances.
- We were reminded that the National Living Wage for workers aged over 25 will rise to £7.50 per hour from April 2017 and will be increased annually at this time. National Minimum Wages rates are also rising next month and annually thereafter at this time.
We hope that you find our budget summary here of interest and should you wish to discuss any aspect of the budget further please do not hesitate to get in touch with me or one of your other Drummond Laurie contacts.