Spring Budget – much ado about not a lot!
The Chancellor appeared in fine form as he delivered his first of two 2017 Budgets, with the annual event moving “permanently” to the autumn later this year, writes Robert Leggett – corporate tax partner, Ensors Chartered Accountants.
The movement in the OBR’s growth forecasts have certainly been a positive for him. Confident in his delivery, perhaps to the point of cockiness; the jokes were very much at the expense of the leader of the opposition.
The most striking tax measures were the changes to the main rates of NICs for the self-employed (which will rise from nine per cent currently to 10 per cent in April 2018, and 11 per cent in April 2019) and to the dividend exemption (which will fall from £5,000 to £2,000 from April 2018).
These are being introduced to close the gap between the taxes on the employed, the self-employed and those working through a limited company.
To the small incorporated business person, who takes money out of their company as a low salary and then dividends, the total impact of the dividend exemption change will be just £225, assuming that they have little or no other income.
For those with substantial other income such as rents, the impact could be as much as £975 or even £1,143, but those cases will probably be in the minority. The NICs change might cost as much as £837 a year by the end of the parliament.
However, these changes miss the main differentiating factor between these methods of working, being Employer’s NICs. With the level of build-up given, I was expecting worse, fearing that Mr Hammond might impose the entire cost of Employer’s NIC on a self-employed worker, or apply the new personal service company rules for the public sector to the private sector. Perhaps this topic will be revisited.
Vitally, we have finally been informed about the start dates for Making Tax Digital. The implementation for unincorporated businesses and landlords with turnover below the VAT threshold will be delayed by a year until April 2019, whilst those with turnover below £10,000 remain exempt.
However, unincorporated businesses and landlords with turnover above the VAT threshold will still enter the system from April 2018 and need to start making plans soon.
Finally, support for those losing out under Business Rates revaluation is welcome. Here, we will see a cap on the increase for those businesses losing Small Business Rates Relief, a £300m fund for discretionary relief in England, and relief for pubs with a rateable value below £100,000.
Longer term plans for a larger reform of the system cannot come soon enough.