Spring Budget 2017

Phillip Hammond gave the 2017 Spring Budget last week, here we provide a full analysis form a payroll perspective.

Introduction

Economic Growth: The government were more than happy with the figures that continued to show economic growth with Gross Domestic Profit (GDP) increased by 1.8% over the year

2017 is forecast at 2.0% growth 2018 is forecast at 1.6% growth 2019 is forecast at 1.7% growth

Employment: The UK has reached record levels of employment and through forecasting see unemployment continuing to decline.

Deficit: It is expected that this will be consistently falling as a percentage of GDP by 2021.

Inflation: forecasted at 2.4% in 2017, 2.3% in 2018, then 2.0% for 2019 to 2021. Inflation has gone up in the last 12 months and CPI reached 1.8% in January due to oil prices and the devaluation of sterling.

UK Debt: This is currently at 88.8% of GDP and is expected to peak in 2017/18 then dropping to 79.8% by 2021/22

Budget Detail

Productivity

Lord Sainsbury Reforms to Technical Education including a 50% increase in learning hours. This forms part of the “T” level qualifications and is in place to raise thee technical skills of UK workers to bridge the current skills we are experiencing Extended the free school program and investment - £216m to be used for school maintenance and upgrading Other school investment Funding for returns to the labour market Discretionary support fund for business rates Small business support for business rates £1,000 business rate discount for public houses with a rateable value up to £100,000 Loans for doctor’s study

Industrial Strategy

A commitment to £23bn into the National Productivity Investment Fund to be used for: Accelerated Fibre Optic Internet delivery A National 5G innovation network £690m towards local authority transport networks Investment in Artificial Intelligence, Robotics, Electric and Driverless cars £300m to develop research development and talent and an addition 1000 PhD’s

Public Spending

£2bn of new additional funding for council social care in 2017/18 and 2019/20 £425m to improve local NHS and Accident and Emergency care and streamlining of services Funding for tackling domestic violence and abuse Expansions to free school transport in line with those receiving free school meals International Women’s day – Centenary commemoration Free childcare increasing from 15 to 30 hours per week for parents of 3 to 4 year olds worth up to £5,000 per child

Tax and Sustainability

The abolition of self-employed flat rate NIC’s (class 2) by April 2018 Self-employed therefore moving to class 4 NIC’s with a 1% increases in April 2108 to 10% and a further 1% increase in April 2019 – the government’s view is to bring the self-employed more in to line with employed staff. This will be for profits between the lower and upper profit limits A reduction in dividend allowances for the self-employed from £5000 to £2000 in April 2018 – reducing the tax differential between employed and self-employed workers and the money will be invested in to public services. Amounts over the new allowance will be charged at: 7.5% for basic rate tax payers 32.5% for higher rate tax payers 38.1% for additional rate payers The introduction of full state pension for the self-employed from April 2016 and a further review of parental benefits for the self-employed Corporate tax continuing to reduce each year reaching 17% by 2020 A one year deferral for “making tax digital” for businesses below the VAT threshold until April 2019 A freeze on the HGV vehicle Levy as well as a freeze on fuel duty New higher rates of recycling targets No changes to fuel or vehicle charges

Avoidance and Evasion

Higher penalties for tax evasion “enablers” (POTAS – Promoters of Tax Avoidance Schemes) Charges on Qualifying Recognised Overseas Pension Schemes(QROPS) – a 25% transfer charge where schemes are taken abroad for possible avoidance of taxation Abuse prevention of stock trading transfers VAT on telecom systems outside of the EU

Other Duties

Alcohol Duty rates to increase by RPI with effect from 13th of March 2017 Tobacco Duty rates to increase by 2% over RPI with effect from 8th of March 2017

Items brought forward from the Autumn Statement 2016 for 2017/18 tax year

A fuel duty freeze for 2017/18 The Tax Free Childcare Scheme is still to go live and is now expected by the end of 2017. The new scheme will be available to parents of children under 12 years old (15 if handicapped) and will be up to 20% of the first £10,000 of childcare costs per child which equates to up to £2000 per child Universal credit – a reduced taper to 63% The NS&I Personal Investment Fund. It was confirmed this would attract a 2.2% yield and deposits of up to £3000 Insurance Premium Tax increases from June 2017 The alignment or Primary and Secondary tax thresholds to £157 per week. As such the primary and secondary thresholds are the same from April meaning employers and employees start paying at the same level Removal of salary sacrifice schemes from April 2017 – schemes “grandfathered” until April 2018 although pensions (including advice), Childcare (including CCV’s), Cycle to work and low emission cars are “ringfenced”. We now await the results in mid-March of the key consultation on the subject and its details. Money Purchase Annual Allowance reduced to £4000 per annum – the amount that can be invested tax free (used after funds have been “flexibly accessed”) Reform and Incentives for Ultra Low Emission Vehicles Off Payroll Working Reforms and IR35 to come in to effect from April 2017 for the public sector moving decisions to the “fee payer” around tax and NI liability and including the production of a digital tool and the alignment of expenses with other employees Personal Tax Allowance increasing to £11,500 (7th consecutive year of increase) – 77% higher than 2010 and it means 1.3 million workers now don’t pay tax since the start of parliament The higher rate threshold increasing to £45,000 (rUK) – Scotland remaining as announced on the 2016/17 figure of £43,000 The lifetime ISA allowance increasing to £20,000 The introduction of the soft drinks “sugar” levy A review of the state pension age to be published by 7th of May 2017

Further Consultations

Benefits in Kind: A Review of the current exemptions and valuation methodology that occurs to create consistency Accommodation Benefits: The tax treatment of employer provided accommodation and board and lodgings Employee Expenses: A review of current income tax relief on employee expenses