The most surprising news of Philip Hammond’s Autumn Statement was his decision to abolish it. In future we will have an Autumn Budget and a Spring Statement. The announcement brought hilarity from the benches, but in reality it does appear to make some sense.
Following the spring 2017 Budget and Finance Bill, the Budget will be delivered in the autumn, with Royal Assent taking place before the tax year begins. This move gives more certainty for taxpayers and their advisers.
It was notable, however, that there was no mention of HMRC’s key future policy initiative for businesses and taxpayers – Making Tax Digital – other than that, the Government has decided to wait until January 2017 to respond to the consultation responses.
So, what were the other key announcements?
The new Chancellor confirmed his commitment to the business tax road map set out by George Osborne. This includes cutting the rate of corporation tax to 17% by 2020.
The Chancellor announced a proposed consultation on restricting the advantages arising on incorporation. Those who remunerate themselves mainly by dividend from limited companies already be aware of the changes to the taxation of dividends which have already had significant affect on their income. What any new measures might entail will be discovered over the coming months.
The Government is proceeding with proposed changes to the taxation of termination payments. From April 2018 termination, payments over £30,000, which are subject to income tax, will also be subject to employer national insurance. Tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.
The Government is also proceeding with restricting the tax advantages of salary sacrifice arrangements from April 2017 for all arrangements except pensions, childcare, Cycle to Work and ultra-low emission cars. However, arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
The Government reaffirmed its commitment to raising the income tax personal allowance to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament. Next year, the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.
The National Insurance employer threshold and the National Insurance employee threshold will be aligned from April 2017, resulting in some additional cost to employers. Class 2 NICs will be abolished from April 2018. Thereafter, the self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs.
Many small businesses take advantage of the VAT Flat Rate Scheme, but businesses with limited costs, such as many labour-only businesses, should note the introduction from 1 April 2017 of a new 16.5% rate to ensure that the scheme is used only as intended.