The Chancellor of the Exchequer, Rt Hon. Philip Hammond M.P., has delivered his first Autumn Budget. This article will outline the key details along with supplementary information relating to impact and issues relating to self-employment, tax and other key priorities.
The end of the Autumn Statement was always going to make this more of a curiosity than anything else. The media lead-up revolved around major changes to VAT registration thresholds. However, ‘Spreadsheet Phil’ didn’t quite do what many thought he would. In fact, this is a (small-c) conservative budget in relation to what the pundits assumed would be possible.
From the 22nd of November 2017, the UK Government will remove stamp duty for all first-time buyers, on properties worth below £300,000 with first-time buyers paying over £5,000 less in relation to stamp duty costs on properties worth between £300,000-£500,000. The Government believes this will remove 80 per cent of the first-time stamp duty cost of purchasing a property – this, the Government argue, will help make it more affordable for young people to get on the housing ladder.
A major capital investment boost was announced by The Chancellor with £44 billion extra earmarked for major capital investment schemes to help inject the housing market with momentum over the next five-years. The Government believes that by mid-2020s, there is a requirement for approximately 300,000 new properties to be constructed – which the Chancellor stated would be the highest housebuilding levels since the 1970s. Another housing change was a 100 per cent premium on second home empty property council tax bills. This new power will allow councils to act on the scourge of long-term empty properties.
Plastic Bag Charge
The runaway success of the 5p plastic bag tax has been given further succour with the government’s next stage plastic reduction policy framework. The popularity towards the removal of microbeads from toiletries products and the impact of plastic waste in the Ocean – as seen on the BBC’s Blue Planet documentary series – has given the Government the popular mandate to investigate how the tax system can help reduce plastic; with a focus on takeaway and other disposable plastic products.
From April 2018, any diesel vehicle that does not meet stringent new air quality standards will be charged an additional tax – however, the Chancellor pledged that the new rules would not hurt any ‘white van man, and no white van woman’ driven. This means the measures are for non-commercial diesel vehicles. The Chancellor also outlined new tax and funding initiatives to help nurture the next stage of electric vehicle production in the UK – with an additional £400 million earmarked for improving the electronic vehicle charging infrastructure fund. On fuel duty, the Chancellor continued the trend for an annual freeze, for the eighth consecutive year, which saves “the average driver £160 a year.”
Education & Early Years
The Government announced £406 million in extra investment in mathematics and technical education provision – the funds will ‘reward’ schools and colleges who endeavour to support advance mathematical studies by creating a mathematics pupil premium; with £600 for every pupil who decides to take any format of mathematics at A-Level.
National Living Wage
The National Living Wage’s annual increase will see a 4.4 per cent rise in the NLW meaning that from April 2018 the UK’s National Living Wage will increase from £7.50 to £7.83 for all UK workers, over the age of 25.
Philip Hammond proclaimed a raft of income tax-related announcements. However, the focus was on the basic-rate threshold for income tax. This will rise from April 2018, to £11,850, up from April 2017’s £11,500. However, the higher-rate threshold for income tax will rise from £45,000 in April 2017 to £46,350 from April 2018.
Philip Hammond announced the introduction of a new Spring 2018 ‘Millenial’ Railcard for the 26-30 age group. Furthermore, from April 2018, the Chancellor announced a freeze on short-haul air passenger duty along with long-haul air passenger duty freeze for economy passengers which is to be offset by an increase on private jet taxation – in the wake of the Isle of Man private jet VAT scandal.
Alcohol and Cigarettes
The Chancellor froze the bulk of the duties on wine, beer and other alcoholic drinks – singling out an increased tax duty on low-quality alcoholic drinks. In order to clamp down on binge drinking of low-quality high-volume drinks. On tobacco, the Chancellor stated that there would be an increase, a 2 per cent increase above the Retail Price Index inflation benchmark until the end of the current Parliament. However, the Chancellor did increase hand rolling tobacco by 1 per cent, from November 22nd, 2017.
Health & Social Care
The NHS, Hamond stated, would get an extra £2.8 billion over the course of the next three years – which is less than the £3.3 billion outlined by the NHS Confederation. The ‘new money’ comes with an emergency injection of £350 million in 2017 with £1.6 billion due in 2018/19 and the remainder, around £850 million, set to be given to the NHS in 2019/20.
Small Business Support
The Chancellor acknowledged the big part played by small businesses in the UK. He also ‘recognised’ that SMEs in the UK are under “great pressure”. This was the rationale behind Hammond’s ‘U-Turn’ on possible VAT threshold changes. The leaked briefing before the Autumn Budget saw the chancellor seriously consider downsizing the VAT threshold from £85,000 to £26,000. This would ‘catch’ lots of businesses in the VAT machinery of Government. However, a less impactful change was announced. It would remain at £85,000 but the uprating would be below the Consumer Price Index, not the Retail Price Index, which would mean some businesses would still ‘fall into the VAT trap’. The move will save the Government £2.3 billion over the course of the parliament. Another giveaway was a £1,000 discount for small pubs until March 2019 to help protect British pubs from closure.
Broadband & Telecoms
Philip Hammond announced that the UK Government will make a £385 million investment in 5G technology and licensing and will explore further financial support mechanisms for full fibre broadband rollout.
How will this affect me – I’m a freelancer/contractor/self-employed?
The budget saw lots of radical changes to the way freelancers, contractors and the self-employed will undertake their business post November 2017. Here is a full run down of the changes?
The IR35 is a major issue within the contractor industry, especially within private sector contractor. Reform is coming, but at a piecemeal rate. The reform will be extended – as was the public-sector contractor rules last October 2017. However, the HMRC wants further consultation with industry leaders in order to understand the impact of the changes. The changes mean that a consultation document is due in 2018. No date set, with preliminary outline drafted in the Taylor Report.
Tax, NIC & Dividend Allowance
The Chancellor announced that both class 1 employer and employee NC threshold will be raised to £162 from April 2018 – an extra £260 per annum before employer and employee NIC fees kick-in. Hammond also outlined a reduction in the tax-free dividend allowance, from £5,000 in April 2017 to £2,000 in April 2018. Sole traders, and the self-employed as a whole, the complete abolishment of Class 2 NIC will be delayed until after April 2019 based on consultation feedback.
Capital Gains Tax annual exemption for individuals will increase to £11,700 in April 2018 from £11,300 in April 2017. The changes will also see a greater leniency in repayment on property with a 30-day payment window on residential property until 2020.
The VAT registration, and deregistration, threshold will not be changed until March 2020. The Chancellor seems to have backtracked on one of the most anticipated parts of the Autumn Budget. However, the threshold will remain at £85,000 during the next two years.
Corporation Tax will remain at 19 per cent, over the next three years, then falling to 17 per cent from April 1st, 2020. In addition, research and development spending will be exempt due to the R&D tax credit which will increase from 11 per cent to 12 per cent from January 2018 onwards.
Tax Avoidance & Evasion
The Finance Bill 2017-18 will outline new strategic measures to help combat tax avoidance through the use of new anti-avoidance measures that can help HMRC understand the gains and income from offshore trusts. This will affect individuals in the UK who receive indirect payments, or benefits therein from the trust. Furthermore, disguised remuneration will also be tackled in the legislation. The Chancellor also outlined the introduction of the close companies’ gateway – a way of tacking disguised remuneration avoidance schemes which will take come into law from April 6th, 2017. All UK residents benefiting from such trusts will have to inform HMRC by 1st of October 2019. Non-compliance timeframes have been reduced and further consultations have been announced by the Chancellor.
If you would like to know more about how the budget fallout will impact you and your business, why not get in contact with Prestige Business Management today to discuss your personal circumstances with our tax team direct? Simply call us on 0203 3773 2927 or email us directly at [email protected] for more information?