Mr Hammond launched the Spring Budget 2017 at lunchtime on 8 March 2017. This is to be the last Spring Budget as part of the government’s plan to simplify tax legislation in the UK.
Below are a few highlights from the measures announced:
Income Tax and National Insurance
The Personal Allowance for income tax is set to increase in April 2017 to £11,500 and the threshold for higher rate tax will increase by £2,000. However, the new Dividend Allowance introduced in April 2016 will be reduced from £5,000 to £2,000 in April 2018.
The Finance Bill 2017 will introduce two new income tax allowances of £1,000 each for trading and property income. The trading allowance is to be deducted directly from income rather than expenses and importantly, will not apply to partnership income.
From April 2017 income tax rates and thresholds for non-savings, non-dividend income for taxpayers in Scotland are going to be set by the Scottish Parliament.
The Spring Budget reports an expected revenue of £175 billion from income tax alone in 2017/18.
Not well received was the news that the rate of Class 4 National Insurance Contributions are to rise to 10% in April 2018 and 11% in 2019. The Spring Budget cites closing the gap between contributions made by employed and self-employed workers as the reason for this – especially in light of the changes to State Pension which have increased the entitlement for those who are self-employed.
Inheritance Tax and Capital Taxes
As already announced by the government, those who have been resident in the UK for 15 out of the past 20 years will now be deemed domiciled for UK inheritance tax purposes. Those who become deemed domiciled under this rule will be able to treat the cost base of non-UK assets as the market value in April 2017. Becoming ‘deemed domiciled’ means that HMRC will consider that you are domiciled in the UK, even if you would say that your domicile is elsewhere in the world.
From April 2017, those who are born in the UK with a UK domicile of origin, but who acquire a domicile of choice elsewhere will be deemed domiciled for all tax purposes whilst they are UK resident.
HMRC’s resource budget is to fall from £3.6 billion in 2016/17 to £3.5 billion in 2017/18, and further to £2.9 billion in 2019/20. It will be interesting to see what impact this will have on the Making Tax Digital scheme – mandatory entry for which has been deferred to April 2019 for unincorporated business and landlords who are under the VAT registration threshold.
The annual ISA allowance is set to increase to £20,000.
A Soft Drinks Industry Levy will be introduced in April 2018 and will apply a tax of 18p per litre on drinks containing 5g of sugar per 100ml, and 24p per litre for drinks containing 8g of sugar per 100ml.
And finally, the Spring Budget announced that £12 million had been raised in the 2016/17 year through the Tampon Tax Fund. This will be distributed amongst various charities which provide support and advice to women and girls in need.
If you need help with any matters arising from the rules and changes announced in the Spring Budget 2017, call Anna on 01865 255632 for a no-obligation conversation.