Holborn Assets Reviews the UK Spring Budget 2017

Posted on: 10th March 2017 in Holborn Assets

What’s big?

The main news is a “2% stealth tax” on self-employed Brits, with changes to the National Insurance Contribution system coming in next tax year.

Personal Finance

Income Tax

• Personal tax-free allowance rises – for the seventh year running – up to £11,500 this tax year.
• High rate minimum threshold rises to £45,000. 

Inheritance Tax

• Family home allowance: a tax-free allowance comes in for the first time this tax year on properties that are being passed directly (ie. not through a discretionary trust) on to direct descendants – with the allowance rising according to a sliding scale until 2020, when the combined allowances of a married couple will mean that they can potentially pass on £1m of assets tax-free.

Pensions

• A tax charge of 25% is made on the transfer amount going in to the QROPS, if the transfer is outside the EU (this does not apply to EU).
• Lifetime Allowance currently at £1m – ie. that’s how much you can save into a pension over a lifetime.

UK Self-employed

• Millions of UK self-employed workers will be paying 2% tax more in National Insurance Contributions.
• Class 2 NICs will be abolished altogether, but Class 4 NICs for the self-employed will increase from 9% to 10% next tax year, and 11% in 2019.
• Chancellor Hammond says that all self-employed people earning less than £16,250 will pay less NI as a result.

NS&I & Isas

• A new bond will be available for savers returning 2.2% on investment up to £3,000.
• Lifetime ISA coming in this tax year (to join 5 other types of ISA).
• ISA limit rising from £15,240 to £20,000 this tax year.

UK Sectors & Business

UK Consumers

• No change to alcohol duties, but a minimum excise duty of £7.35 to come in per packet of cigarettes.
• Sugar levy confirmed at !8p and 24p per litre for big brands.

UK SMEs

• Business rates generate £25bn a year.
• 90% of pubs to receive £1K discount on their business rates.
• Companies leaving Small Business Rate Relief to have any rates increase capped to £50 per month.
• Directors of SMEs will only be able to withdraw £2000 a year as tax-free dividends from 2018 – down from a current tax-free dividend allowance of £5000.

NHS & Care

• “Additional grant funding of £2bn to social care in England over the next 3 years to “deliver immediate benefit to NHS”.

Housing

• Buy-to-Let Changes announced in 2015 mean that, from April 6^th this year, BTL landlords will only be able to deduct 75% of mortgage interest against their rental income in tax calculations. This deductible percentage is being decreased by 25% each year until 2020-2021, when it will no longer be possible to deduct any mortgage interest at all.

Education

• New system of “T-levels” to roll-out in technical qualifications.

Government Benefits

• Universal Credit taper rate to be reduced from 65% to 63% this tax year – reducing tax for 3m low-income families.
• Tax-free childcare policy to pay out £2k a year to eligible parents of children aged under 12.
• (National Living Wage will rise to £7.50 this tax year)

Other

• £90m extra transport spending for North of England, and £23m for the Midlands.
• £16m for a new 5G tech hub, £200 for local fibre broadband projects, £300m for biotech studies.

UK Treasury

• UK debt stands at £1.7 trillion – that’s almost 87% of the UK’s GDP.
• The UK debt/GDP ratio is expected to decline to 80% by 2021/2022.
• The ratio of public sector net borrowing to GDP is to be trimmed back from 3.5% to 2.6%.
• UK inflation will rise to 2.4% in 2017.