09 March 2017

The Budget 2017

The Chancellor didn't disappoint experts who predicted a low-key budget. He has, after all, just abolished it, so there will be just one major 'fiscal event' a year, starting with the Autumn Budget later this year, when more major policy announcements on tax and finance matters are expected.

His key announcements were about preparing public finances for Brexit and new measures to help pay for long-term social care: £2bn over the next three years, including £1bn for 2017-18. He also announced the government will look to strengthen consumer rights by making T&Cs clearer and clamping down on unexpected charges.

But the Chancellor also announced changes that will affect savings, investments, household bills and family finances, including a rise in National Insurance for self-employed workers.

Income Taxes

Hammond confirmed that everyone will get a personal allowance of £11,500 from April 2017 before the basic rate of income tax at 20% is payable, and that this allowance will go up to £12,500 by 2020.

The higher tax rate of 40% will be payable on income above £45,000 from April 2017, rising to £50,000 by 2020.

Also, the national living wage will rise to £7.50 an hour from April 2017.

National Insurance

The self-employed will see their National Insurance Class 4 contributions rise by 1% to 10% from April 2018 and by a further 1% the year after, at the same time as Class 2 NIC for the self-employed will be abolished.

The number of British people registered as self-employed has been rising in recent years. One reason for this, said Hammond, is that the current tax system favours the self-employed over employees. Employees currently pay 12% NI on earnings between £8,164 and £45,000 each year, with the self-employed paying 9%.

Mr Hammond said his changes are designed to bring National Insurance contributions for the self-employed into line with rates paid by employees on the PAYE system, so both gain access to state benefits on a similar rate of National Insurance.

There were no major changes to stamp duty, inheritance tax or pensions tax relief.

Savings

The Chancellor announced measures to support savings. Everyone will have an annual ISA allowance of £20,000 from April 2017, up £4,760 from £15,240, which can be paid into a cash ISA, stocks and shares ISA or any combination of both while remaining tax-efficient.

Impact on families

Inflation, which went up to a 31-month high in January of 1.8%, is set to rise further, adding more pressure on the families the government talks about.

It's expected to reach 2.4% in 2017-18 before falling to the Bank of England's 2% target by 2019-20. The continued freeze on fuel duty will help to counter some of these rising living costs.

Hammond also pledged that all children under 12 will be entitled to up to £2,000 a year towards the cost of childcare. Workers with three and four-year-old children will get double the current amount of free childcare: up to 30 hours a week.

He also confirmed that the Sugar Tax levy will be 18p per litre for soft drinks containing more than 5% sugar, and 24p per litre on those with 8% or more, with the proceeds being used to fund school sports facilities.

Businesses and Corporation Tax

Corporation Tax will be cut to 19% from April 2017 and down to 17% by 2020. There will be some help for businesses potentially affected by planned increases in business rates. Hammond also admitted there needs to be “a better way of taxing the digital economy".

The Chancellor also announced the tax free dividend allowance for directors will be reduced from £5,000 to £2,000 from April 2018.

He finished his speech by saying: “Today we reaffirm our commitment to invest in Britain's future to build a stronger, fairer, better Britain."

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