Today the Chancellor of the Exchequer, Philip Hammond, announced his first Budget. As usual the Budget covered everything from changes in welfare to changes in personal finance (which I have focused on in this post).
If you have any questions about how these new measures could benefit you or your family please do not hesitate to Contact us.
You can jump to a section using the following links:
- Lifetime ISA
- Savings and Investments
- Inheritance Tax
- Our local area
- Personal Taxation
An Overview and Analysis of the 2017 Budget
Class 2 National Insurance contributions (a flat amount, paid by self-employed workers) will be scrapped as planned from April 2018.
However Class 4 National Insurance contributions (a percentage rate, paid by self-employed workers) will increase. Class 4 NICs are paid on self-employed earnings between £8,640 and £43,000 per year. The rate will increase from 9% currently to 10% in April 2018 and 11% in April 2019. Earnings above £43,000 are currently subject to 2% Class 4 NICs and this will remain unchanged (so only earnings between £8,640 and £43,000 are affected). This was the most surprising news of the day and is expected to hit millions of self-employed people across the UK.
Shareholders will also be hit by one of Hammond’s announcements: this time last year there were major changes to dividend taxation (which I explained in greater detail in a previous post: Dividend tax changes). These changes introduced a tax-free dividend allowance of £5,000 per year and varying rates of income tax for anyone with dividend income greater than £5,000. This allowance will be reduced from £5,000 per year to £2,000 per year in April 2018.
No changes were announced to the LISA, which means we can expect this new product to be introduced as planned on 6th April 2017. The LISA gives savers aged between 18 and 40 a generous government bonus as long as the LISA savings are eventually used for retirement or for a first house purchase.
The LISA is explained in more detail in another post which you can read here: Introducing The Lifetime ISA.
While no new pension rules were revealed, this means the previously-announced reduction in the Money Purchase Annual Allowance will be introduced as planned from 6th April. This change affects anyone who has taken withdrawals from a personal pension scheme under the “flexible pensions” rules and who plans to continue saving into a pension in the future. The Money Purchase Annual Allowance will reduce from £10,000 per year to just £4,000 from 6th April 2017.
The Annual Allowance is covered in more detail on our Annual Allowance page.
Savings and Investments
The ISA limit for the 2017/18 tax year will increase from £15,240 currently to £20,000 as planned.
No changes were announced in relation to Inheritance Tax in today’s Budget. This means the Main Residence Nil Rate Band should be introduced as planned from 6th April 2017 which will benefit homeowners who plan to leave their house to their children or grandchildren.
You can read more about this topic here: Upcoming changes to Inheritance Tax rules
Our local area
There was no mention of either the North East or the “Northern Powerhouse” in the Budget.
The Personal Allowance (the amount you can earn tax-free each year) will rise to £11,500 (from £11,000 currently) as planned on 6th April 2017.
The higher rate band will rise to £33,500 (from £32,000 currently) as planned. This means anyone with total income under £45,000 (the £33,500 higher rate band plus £11,500 personal allowance) should not pay higher rate tax from April 2017.