Spring budget round up
By Sr Duran-Corretjer Duran-Corretjer
Jennifer Parnell looks at the key issues likely to affect individuals and businesses following the chancellor's latest announcements
The month of March saw Philip Hammond present his second, and potentially his last, set of budget announcements as chancellor of the exchequer. There were some highs and some lows presented. With the recent announcement of a general election to take place on 8 June, it remains to be seen whether a new government will honour these most recent changes or not.Personal taxation
As has been the case for several tax years now, the personal allowance has increased to £11,500 for 2017/18, with the higher rate threshold rising by £2,000 to £45,000. The national insurance contribution upper earnings limit and upper profits limits have increased for 2017/18 in line with the higher rate threshold of £45,000 for 2017/18. The chancellor caused some controversy by announcing that class 4 NICs (those paid by the self-employed) were to be increased from 9 per cent to 10 per cent in April 2018 and to 11 per cent in 2019. Met with strong public backlash and some negative publicity from the media, the chancellor has since completed a U-turn on his announcement and instead confirmed that class 4 contributions will remain taxed at the current rate.
The dividend tax allowance which was introduced in 2016/17 continues to be available for the current tax year. This is currently an allowance of £5,000 available to all individuals and taxed at 0 per cent. This, however, will be reducing in 2018/19 to £2,000, a reduction which may well affect many individuals.
Off-payroll working in the public sector was another subject covered in March’s budget, which saw the rules tighten when it comes to use of personal service companies which have contracts with public sector organisations. The reforms will place responsibility on the public sector bodies, who employ the personal services companies, to now operate the off-payroll working rules and deduct any tax and national insurance due. It is envisaged this will affect a number of individuals, personal services companies, and public sector organisations. The change came into effect from 6 April 2017.
The annual exempt amount in respect of capital gains tax was another allowance which saw an increase from 2015/16. The annual exempt allowance for 2017/18 is £11,300 which is up £200 from £11,100 in 2015/16. Capital gains tax rates remain at 10 per cent up to the basic rate limit and 20 per cent above the basic rate limit in respect of general capital gains. The tax rates experience an 8 per cent surcharge at both levels where residential property and carried interest are concerned.
Business taxationIt has been widely publicised that corporation tax rates have dropped to 19 per cent with effect from 6 April 2017. These will then further fall to 17 per cent in 2020. This is likely to have vast benefits to the majority of companies, allowing businesses greater cash flow opportunities through the reduction of compulsory taxes payable.
There are few changes coming into play from 6 April 2017 in respect of capital expenditure. New and used cars with carbon dioxide emissions not exceeding 75g/km and electric cars will receive 100 per cent first year allowance. The government has confirmed that from April 2018 this threshold will fall to 50g/km. The annual investment allowance continues to be available on plant and machinery at £200,000 and there was no change to the annual reducing balance rates of 18 per cent and 8 per cent (for special rate pools).
Making tax digital
The government’s widely anticipated ‘Making Tax Digital’ initiative will come into force from 6 April 2018. This is set to change the way individuals and businesses report their financial details to HMRC. Individuals are encouraged to access their online Government Gateway account in the lead up to this date, in preparation for the compliance reporting beginning in the new tax year. Information from various sources, including PAYE from employers and interest information from banks and building societies, will be fed into an individual taxpayer’s personal account. The new process is designed to aid better record keeping for the individual while allowing HMRC access to more real time information.
It is the Revenue’s desire that by 2020 most taxpayers will no longer be required to fill in a tax return, which could be welcome news to a number of individuals.
Jennifer Parnell is and accounts and outsourcing supervisor at Kreston Reeves