Chancellor Philip Hammond presented his first – and last – Spring Budget on 8 March 2017, unveiling a number of significant measures for businesses and individuals. Here we provide an overview of some of the announcements, together with some other recent changes.
Business rates support package
Following the recent business rates revaluation in England, the government will provide further support for businesses facing significant increases in bills. This includes support for those firms losing Small Business Rate Relief, to limit rates increases to the greater of £600 or the real terms transitional relief cap for small businesses. A £300m ‘hardship fund’ will also be available to local authorities in England to provide support for individual cases.
In addition, a £1,000 business rates discount will apply to public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, effective for one year from 1 April 2017.
Income tax measures
For 2017/18 the personal allowance has increased to £11,500 and the basic rate limit to £33,500 as planned. However, for 2017/18 the Scottish government has exercised its new income tax setting powers and the basic rate band for Scottish taxpayers has been set at £31,500.
The government is planning to reduce the tax-free dividend allowance from £5,000 to £2,000 from 6 April 2018.
National insurance contributions
Class 2 national insurance contributions (NICs) will be abolished from April 2018, as previously planned.
The Chancellor also unveiled plans to increase the main rate of Class 4 NICs for the self-employed from 9% to 10% with effect from 6 April 2018, and from 10% to 11% from 6 April 2019. However, following considerable controversy over the announcement, the Chancellor subsequently confirmed that the government will not proceed with the increases.
Research and development (R&D)
The Chancellor announced that administrative changes will be made to R&D tax credits, with the stated aim of increasing the certainty and simplicity around claims, and the government will be taking action to improve awareness of R&D tax credits among SMEs.
Cash basis accounting
The entry and exit thresholds for cash basis accounting increased to £150,000 and £300,000, respectively, with effect from 6 April 2017. The government will also simplify the rules on capital and revenue expenditure within the cash basis, to make it easier for businesses to work out whether the expenditure is deductible for tax.
Vehicle Excise Duty (VED) rates
A new VED system now applies to the taxation of most passenger vehicles registered on or after 1 April 2017.
For the first year this is based on CO2 emissions. For following years, all vehicles with zero emissions will be exempt from the standard rate of vehicle tax, and all other petrol or diesel vehicles will pay a standard rate of £140 a year.
An additional rate will be added for all new vehicles with a list price of over £40,000 (including zero emission vehicles). Alternative fuel vehicles continue to receive a £10 reduction on the standard and first year rates.
New NS&I Investment Bond
The Chancellor confirmed the rate of the new NS&I Investment Bond, which was announced at Autumn Statement 2016. The Investment Guaranteed Growth Bond offers a rate of 2.2% over a term of three years and is available for 12 months from April 2017. The Bond is open to everyone aged 16 and over, subject to a minimum investment of £100 and a maximum investment limit of £3,000.
New Budget timetable
The Chancellor also unveiled plans to introduce a new timetable for future Budgets, which will see the main annual Budget taking place in the Autumn, to be followed by a Spring Statement. From 2018, the Office for Budget Responsibility will produce a Spring forecast, and the Chancellor will make his Statement responding to that forecast.
Please note that the information in this article was correct at the time of printing and does not take into account any changes following the General Election in June 2017.
For more information on the Budget announcements and how they could affect you and your business, please contact us.