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Only a few months after his Autumn Statement, with Brexit uncertainty still hanging over the Government, Mr Hammond’s tone was surprisingly different in the Budget 2017. Far more upbeat and confident, ‘Spreadsheet Phil’ was equally at ease delivering jokes at his own expense, political jibes against a nonplussed Jeremy Corbyn, or explaining new measures.
After initially being spun as a low-profile, Brexit-preparation budget, the last 48 hours have seen a flurry of stories emerge – many of which were, we now see, justified.
There were many announcements relating to education, social care, and devolution. But these are not likely to have an impact – directly or indirectly – on our community of the self-employed, entrepreneurs, freelancers, contractors, and small businesses. As expected, increases to the personal tax allowance and reductions in Corporation Tax are going ahead.
For the self-employed and small businesses, there were some major changes announced. Here’s our take on the highlights.
Mr Hammond announced the long suspected measure that firms with turnover under the VAT threshold of £83,000 a year will be given an extra year to comply with Making Tax Digital. This doesn’t change the overall nature of the programme, but does give smaller firms a bit more time.
Self-employed people will see significant changes to their National Insurance contributions (NICs). Class 2 NICs, which are currently for the self-employed only, are being abolished in April 2018 as previously announced by George Osborne.
Mr Hammond announced that class 4 NICs will be increased from 9% for the self-employed to 10% in April 2018 and 11% in April 2019.
In return, as we proposed in our research with The RSA, a consultation will be launched by Government on granting the self-employed greater parental support, as is already enjoyed by employees. It’s also worth noting that the self-employed became eligible for the new single state pension from April 2016, a significant and expensive new benefit for Government to offer which these NICs changes will help to fund.
For those working through a limited company, Mr Hammond disappointingly announced a reduction in the dividend tax allowance from £5,000 per year down to £2,000 per year in 2018/19.
We’ve long campaigned on the changes to dividend income tax as we believe they’re ill-considered. This latest change will cost a company director £225 a year in additional tax paid if the dividends are charged at the basic rate of tax.
From 1st April 2017, the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000. This is a mild inflationary change that won’t have much impact.
We’ll publish more detailed analysis and modelling as the Treasury releases the fine print.
You might avoid a fine if a close relative died shortly before the self assessment deadline, you've been seriously ill, or if you had major IT problems.