After the controversy of the spring budget where the Government was forced into a U-turn on national insurance, the Chancellor was perhaps relieved that this week’s budget was viewed as perhaps a bit dull by some commentators.
The norm for budgets in the early life of a Government is to push through the unpopular policies at the earliest opportunity and hence furthest away from the next election. It was unusual therefore (and perhaps a reflection of the difficult environment in Westminster), that this budget saw a net tax giveaway of around £1.6 billion. We have outlined some of the key headlines below.
An additional £3 billion has been set aside in a Brexit fighting fund to help the UK prepare for all Brexit related eventualities
The tax free personal allowance is to rise to £11,850 from £11,500 in April 2018 and continue to rise to £12,500 by 2020.
The amount you can earn before paying 40% tax will rise in April 2018 to £46,350 from £45,000.
The national minimum wage for over 25’s will increase from £7.50 to £7.83 an hour in April 2018.
There has been no change to NIC with both employees and employers NIC remaining the same.
Capital gains tax allowance will rise to £11,700 from April 2018.
Inheritance tax band unchanged at £235,000.
ISA limits are unchanged, whilst there was a modest uplift in the lifetime allowance for pension savings from £1m to £1.03 million from April 2018.
National Insurance Contributions for the self-employed remain unchanged from the Spring budget with Class 4 NIC increasing to 10% in April 2018 and 11% in April 2019.
The 0% dividend band also remains unchanged with the allowance falling to £2,000 from April 2018.
Diesel car supplement for company car tax will increase by 1%.The VAT registration threshold remains unchanged at £85,000 (and will do so until at least 31 March 2020), despite rumours that this was to be lowered significantly.
The rate of the tax credit for R&D expenditure will rise from 11% to 12% from 1 January 2018.
A raft of measures was introduced with the aim of introducing a greater emphasis on risk investment to venture capital trusts, enterprise investment schemes and seed enterprise investment schemes.
Despite some rumours, there was no action taken on inheritance tax business relief.
This was the Chancellor’s ‘rabbit-out-of-the-hat’. Stamp Duty has been scrapped for all first-time buyers on the first £300,00 for properties priced up to £500,000. This crowd pleaser accounted for around one third of the Chancellor’s net tax giveaway.
Making Tax Digital
No business will be required to use MTD until April 2019. From that date, only those with turnover above the VAT threshold will have to use MTD, and then only for VAT obligations. The scope of MTD will not be widened until the system has been shown to work effectively, and in any case, not before April 2020 at the earliest.
In our view this was a largely neutral budget and lacked any real blockbuster policies that some were hoping for. There was some good news for first time home buyers with the removal of stamp duty up to £300k, although there is some nervousness that this may lead to increased house prices. We also welcome the fact that, despite various rumours, the Chancellor refrained from reducing the VAT threshold or tinkering with business relief for inheritance tax purposes.
A key piece of news released by the Chancellor was that the Treasury’s official forecasting watchdog (the OBR) had slashed its 5-year growth forecasts to the lowest levels since 1983. The downgrade was largely the result of wage stagnation and the continuing stubbornness of productively levels, which are remain significantly below 2008 crisis levels.
Poor productivity has been a significant problem in the UK for a number of years and indeed it lags behind many of its European rivals. However, this also presents a great opportunity for businesses and the accountancy profession is well placed to work with clients to help increase productivity, lower costs and grow profits.
On a local level, we welcome the fact that negotiations and consultations will open on a City Deal for Belfast which will give the city certain powers to create jobs and support economic growth. This will be a boost for investment in skills, economic development and will prove attractive to investors. This news, along with other local opportunities such as the ability to lower corporation tax rates in NI, show why it is vital that the Stormont assembly starts functioning again as soon as possible.
If you wish to discuss any aspects of the budget or explore how your business should react, please get in touch with the RBL team 02895320155 | firstname.lastname@example.org