Chancellor Philip Hammond announced the Spring Budget on Wednesday in a year which will see the Budget move from Spring to Autumn.
Although the announcement was, on the whole, uneventful, the double Budget this year has the potential to really effect our clients.
Here we give you our take on this week’s news and how this paves the way for the Autumn red box.
For those with dividends it may seem as though you have been given something with one hand and it will be taken away with the other.
A relatively short time ago in 2016 the tax free dividend allowance was announced as £5000. The Budget delivered the news that this amount will be reduced to £2000.
Those of you who are self employed will see a big difference in your tax bill if you pay yourself in dividends alongside a wage. Equally if you have a large amount of shares you will see a change.
National Insurance Increase
In a controversial move that appears to have gone back on the Conservative’s 2015 manifesto, the chancellor stated that Class 4 National Insurance contributions will be increased by 1% from 9% to 10% from 2018. This will then rise to 11 % in 2019. The revenue raised by the increase will amount to £1.5bn by the 2020/21 tax year.
Hammond says the change will cost a typical self-employed worker an extra 60p per week, however he will not be reversing former Chancellor’s decision to abolish Class 2 contributions for the self-employed which currently amounts to £2.80 a week.
Hammond says: “An employee earning £32,000 will pay £6,170 of National Insurance contributions. A self-employed person earning an equivalent amount will pay £2,200, significantly less than half that figure.
It was good news for women who need support in going back to work after a career break. £5m was pledged for ‘returnships’.
If you are in receipt of a pension income then the annual allowance for new pension contributions will be £4,000 from April 2018 currently £10,000 per annum.
What is happening in April 2017?
Personal tax allowance
As expected this will increase to £11,500 in April and is set to rise to £12,500 by 2020-21.
Lifetime Individual Savings Account
Over the next few months we will see the launch of the Lifetime Individual Savings account (LISA) for those between 18 and 40. £4000 a year can be saved with a government bonus of 25% if the money is used to buy a home or for a pension.
People will be able to pass on their property to their descendants to the value of £100,000.
The new Transferable Main Residence Allowance (TMRA) will be added to the Inheritance Tax threshold of £325,000, so in total it will allow each individual to pass on £425,000 with no tax payable – this equates to £850,000 per couple.
So we will see what the Autumn Budget brings, in the meantime contact your adviser if there is anything you are concerned about or would like further advice on.