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Spring Budget 2017: how will the announcements affect you?

Following the UK’s historic vote to leave the EU, and with Prime Minister Theresa May poised to trigger Article 50, Chancellor Philip Hammond presented the Spring Budget against a backdrop of economic uncertainty. Figures from the Office for Budget Responsibility revealed that UK economic growth is now expected to reach 2% this year, before falling to 1.6% in 2018.

The Chancellor announced a range of significant measures for businesses and individuals, including a support package for firms in England affected by the business rates revaluation and the announcement that unincorporated businesses and landlords with turnover below the VAT registration threshold will have until 2019 to prepare for quarterly reporting.

Also unveiled in the 2017 Spring Budget was an increase in the main rate of Class 4 national insurance contributions (NICs) to 10% in April 2018 and a reduction in the tax-free dividend allowance, which will fall from £5,000 to £2,000 in April 2018.

Our Budget Report provides an overview of the key announcements arising from the Chancellor’s speech. However, it also looks beyond the more sensational measures and offers detail on the less-publicised changes that are most likely to have an impact upon your business and your personal finances.

Additionally, throughout the Report you will find handy tips and ideas for practical tax and financial planning, as well as an informative 2017/18 Tax Calendar.

Don’t forget, we can help to ensure that your accounts are accurate and fully compliant, as well as suggest strategies to minimise your tax liability and maximise your profitability.

Click the link to download the Spring Budget 2017 Summary.

Have a question on the Spring Budget 2017? Leave a question or comment below and we can offer you expert advice.

At Ormerod Rutter we understand that finances and tax can sometimes be confusing. We have 15 expert partners to hand that can offer expert advice on all financial matters, no matter how big or small. We pride ourselves on having big firm capabilities and family firm personality. Have a question or want to discuss your personal or business finances? Give us a call on 01905 777600.

* Please note that all information contained in this article is for informative purposes only and that we cannot be responsible for any errors or omissions.*

*Since the Budget the government has now made a U-turn and will not be increasing the National Insurance Contributions from the self-employed. This was overturned as it went against one of the main Conservative manifestoes promises of not raising taxes. 

Budget Summary: what the Summer Budget means for tax

Chancellor George Osborne delivered his seventh Budget today, the first for a majority Conservative government in 20 years. His announcements included expected changes to the welfare system and further measures to crack down on tax evasion and avoidance, as he presented his plans to reduce the deficit.

Mr Osborne announced in his opening statement that this is a Budget that puts security first, that recognises the hard work and sacrifice of the British people over the last 5 years and that will not put that at risk.

George Osborne holds red briefcase outside Number 11 Downing Street - Budget 2015

He began by announcing that in the March Budget it was thought that the economy grew by 2.6% last year. We now know that it grew by 3%. The Chancellor announced that he will make savings of £34bn over this parliament, half of which will come from government departments’ budgets. The remaining £17bn will come from £12bn in welfare cuts and £5bn from a further crackdown on tax avoidance and loopholes.

As expected, cuts to welfare spending were announced – but there were also some shock announcements too. The surprise move to bring in a “national living wage” of £9 an hour for over 25s by 2020 was met with cheers.

The current minimum wage, which applies to those over 21, is £6.50 per hour. Those entitled to the “living wage” will get £7.20 from next April, and this will rise to £9 an hour by 2020. Labour had vowed to increase minimum wage to £8 by 2020 during their general election campaign.


 

Here is our Budget summary of some of the other major announcements made today:

Income tax:

  • A tax lock will be legislated for in coming weeks to prohibit increases in the main rates of income tax, national insurance and VAT
  • The tax-free personal allowance will be raised from £10,600 to £11,000 next year
  • The 40p tax threshold will be raised from £42,385 to £43,000 in 2016-17

Corporation tax:

  • Corporation tax will be cut to 19% in 2017, then 18% from 2020
  • Small firms will pay less National Insurance Contributions, with a £3000 employment allowance (so a small firm will be able to hire 4 members of staff on the National Living Wage and pay no NI)
  • The annual investment allowance will be set at £200,000 permanently from January 2016

Pensions:

  • The tax-free contributions allowance for those earning more than £150,000 will be tapered away from its current £40,000 per year to a minimum of £10,000
  • Dividend tax credit will be replaced by a £5,000 tax-free dividend allowance
  • Dividend tax rates will rise from 0 to 7.5% for basic rate income tax payers, from 25% to 32.5% for higher rate taxpayers, and from 30.56% to 38.1% for additional rate tax payers

Non-Domicile Status:

  • Non-dom tax status will no longer be inheritable
  • Permanent non-dom status will be abolished from April 2017 – anyone who has lived in the UK for 15 of the past 20 years will pay the same level of tax as other UK citizens

Inheritance Tax:

  • From 2017, there will be an extra £175,000 inheritance tax allowance (on top of the £325,000 standard inheritance tax allowance currently) for those who leave their homes to their children or grandchildren. This relief is tapered away for those with estates of more than £2m.
  • Married couples and civil partners are now able to inherit up to £1m tax-free from each other.

 

Other changes include changes to child benefit tax credits, which will be limited to the first two children from April 2017, a reduction in tax relief on buy-to-let mortgage interest payments, and the abolition of maintenance grants for university students, which will be replaced by maintenance loans.

HMRC’s budget has also been increased by £750m to further aid the crackdown on tax evasion and avoidance.

 

The Office for Budget Responsibility summarised:

“The new Government has used its first Budget to loosen significantly the impending squeeze on public services, financed by welfare cuts, net tax increases and three years of higher borrowing. The Government has also delayed the expected return to a budget surplus by a year to 2019-20, but is then aiming for a slightly bigger surplus in the medium term.”

A full report can be found on their website.

 

If you have any concerns or would like any further information about how today’s announcement will affect your tax position, please speak to your usual Ormerod Rutter partner or contact us to speak to a member of the team.

Budget 2015: ‘death of the tax return’ – what does it really mean?

In yesterday’s budget speech chancellor George Osborne announced that he will abolish the “complex, costly and time consuming” tax return that 12 million people in the UK have to fill out each year.

In a move that Mr Osborne described as “a revolutionary simplification of tax collection”, the ‘death of the annual tax return’ has grabbed headlines, but what does it actually mean?

According to the Treasury, the annual tax return as we know it will be completely replaced by ‘digital tax accounts’ by 2020. Under the new system, individuals and small businesses will submit their accounts online throughout the year via computer, tablet or smartphone.

The new online system will bring together information about earnings, savings and pensions and “new data from third parties”, as well as linking to accounting software and online bank accounts to feed in data automatically. Taxpayers will be able to submit their information regularly and see how their tax is calculated, to give an overall picture of their tax affairs in real time.

One of the main changes will be the end of the annual tax bill, as individuals and businesses will have the option to “pay as you go” throughout the year, with payments being calculated based on real time information rather than last year’s figures.

The ‘death of the annual tax return’ promise may be a bit misleading, as you will still need to maintain accurate tax records throughout the year, but the new system is designed to make the process simpler.

Many of those with simple tax affairs, such as higher-income families, will benefit from the new system. Since last year, families where one parent earns more than £50,000 have had to fill in a self-assessment return, since child benefit payments are reduced above this threshold, but under the new system these payments should be calculated automatically.

It is expected that five million small businesses and 10 million individuals will begin to use the new system in early 2016, and that by 2017 the first group with simple tax affairs will no longer have to complete an annual tax return. The system should be completely rolled out by 2020 by which time businesses should be able to link their accounting software to their digital tax account.

HMRC said it will publish a full timetable later in the year setting out the policy and administrative changes needed to implement this reform.

Ormerod Rutter Budget Report 2015

Budget Summary 2015: What does it mean for you?

George Osborne presented his final Budget before the coming election in May yesterday. Find out what it means for you and your business with our free Budget Summary 2015, which you can download here:

Ormerod Rutter Budget Report 2015

The Chancellor’s 2015 Budget contained some important announcements and confirmed a number of changes planned for the new tax year ahead. This was a forward-looking Budget, with much of the content based on the assumption that the current Government will pick up where it left off, after the General Election on 7 May 2015.

If you’d like to discuss how anything in the Budget announcement affects you from a tax or financial position, please contact us.

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