2017 spring budget - as dull as it was cracked up to be
A dull budget was forecast, and whilst he teetered on the edge of dramatically changing self-employed national insurance and the taxation of dividends from owner-managed businesses, in the end “Box-Office Phil” avoided creating anything interesting.
Self-employed NI Contributions “NICs” (class 4) are going to be increased by 1% per annum for the next two years. They could have been immediately bumped up to the same rates paid by employees, but they weren’t. There was, incidentally, a manifesto commitment not to raise NICs – but hey, ho. What do promises matter these days?
The recently introduced Dividend Allowance is being cut from £5,000 to £2,000 from 2018. That is not going to be enough to make any difference to the level of incorporations. For many income bands, there is still a clear advantage to setting up a limited company and taking a low salary and high dividends (to which NICs do not apply).
The implementation of Making Tax Digital “MTD” quarterly reporting has been deferred by a year for businesses below the VAT threshold. Does that mean HMRC wasn’t going to be able to cope with it? It always seemed perverse that quarterly reporting was starting with small businesses least able to cope with it.
If you use your phone outwith the EU, VAT is now going to be imposed on the charges.
And – don’t shoot the pianist – there are going to be new financial penalties for professionals who create schemes defeated by HMRC. They know who they are, I suppose.
Apart from that, at first glance, there isn’t any drama. As previously announced:
Personal allowances will rise from £11,000 to £11,500 in April.
Corporation tax will fall to 19% from April 2018, and to 17% by 2020.
There is an ongoing review of tax treatment of the self-employed by Matthew Taylor of RSA, so expect more changes in the Autumn budget.
The National Living Wage is to rise to £7.50 (for those 25 years and over) in April. The National Minimum Wage is rising to £7.05 for those aged 21-14. Is it me, or has there been a deliberate blurring of the distinction between NLW and NMW – with the effect of hiking up the rates? In 2 years, the rate from someone aged over 25 has gone from £6.70 to £7.50 – that is a 12% increase.
As always, the devil will be in the detail, which we will discover in the days and weeks ahead!
“Reality really isn't as dull as it's cracked up to be.” Estelle. Oh, really?