The Chancellor of the Exchequer, Philip Hammond, confirmed a commitment to economic growth and maintaining the UK as one of the best places in the world to do business, achieved through focusing on economic stability and encouraging productivity.
The Budget included a number of measures that are likely to impact the self-employed and small businesses, including an increase in National Insurance Contributions (NICs) for the self-employed and a reduction in the tax-free dividend allowance from £5,000 to £2,000. He also confirmed that corporation tax would fall to 17% in 2020 and that plans to enforce quarterly digital tax reporting would be deferred for businesses and landlords under the VAT threshold.
Mr Hammond also confirmed increases in the personal tax allowance and the National Minimum and Living Wage, along with the introduction of a new NS&I Investment Bond for savers.
Corporation tax – Corporation tax rates will reduce to 19% from 1 April and to 17% from April 2020.
Increase in Class 4 NICs – Class 4 NICs will rise from 9% currently – on earnings between £8,060 and £43,000 – to 10% from April 2018; and go up again by a further one percentage to 11% in April 2019. This is a shift from the previous statements, which increased taxation for dividends from limited companies. The increase in NICs for the self-employed may potentially make incorporation a more appealing option, depending on your prevailing tax position.
Tax-free dividend reductions – The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. It means a basic rate tax payer who receives £5,000 in dividends will have to pay an extra £225 tax from April 2018. A higher rate tax payer will pay an extra £975.
Delay on Making Tax Digital (MTD) for smaller businesses – Small businesses and landlords under the VAT threshold will have an extra year to prep for Making Tax Digital and won’t be required to comply with quarterly digital reporting to HMRC until 2019.
Support for small businesses affected by business rates relief changes – If your business loses Small Business Rate Relief, any increase will be capped at the greater amount of £50 per month
Personal allowance and higher rate threshold – The Chancellor confirmed that the personal allowance will rise from £11,000 to £11,500 and the higher rate threshold from £43,000 to £45,000 from 6 April 2017. He stated that the government will meet its commitment to raise the income tax personal allowance to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament. Once the personal allowance reaches £12,500, it will then rise in line with the Consumer Prices Index (CPI).
Savings – NS&I will offer a new three-year savings bond from April 2017. The bond will pay 2.2% interest on deposits of up to £3,000. The bond will be open to those aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000. The annual subscription limit for Junior ISAs and Child Trust Funds will be uprated in line with CPI to £4,128. As previously announced, the ISA limit will rise from £15,240 to £20,000. Both of these changes take effect from 6 April 2017.
National Living Wage (NLW) and National Minimum Wage (NMW) – The National Living Wage will increase as planned from £7.20 to £7.50 from April 2017.
Tax-free child care – Working parents with three-and-four-year-olds will see their free childcare entitlement doubled to 30 hours a week from September – a move worth up to £5,000 a child. Full details can be found here.
Fuel duty – Fuel duty will be frozen for a seventh year, but the cost of vehicle insurance may rise owing to an increase in the Insurance Premium Tax from 10% to 12% in June
Pubs with a rateable value of less than £100,000 will get a one-year £1,000 discount on rates they would have paid.
A number of investment initiatives were announced to deal with a range of issues: