Budget of a broken promise?

Posted on: March 9th, 2017 by Tim Buringham

Philip Hammond’s first, and last, Spring Budget went according to plan, in that it was a rather dull event in terms of tax announcements.

With the triggering of Article 50 imminent, this was the cautious Budget that most had expected, with little offered in the form of any major changes to the tax system.

Arguably the most notable announcement was the proposed rise in Class 4 National Insurance Contributions (NIC) rates for the self-employed. This has been somewhat controversial given the ‘tax lock’ previously pledged by the Conservative Government, which promised no such increases within this Parliament. The Government has argued that Class 4 NIC was not included in this pledge, however, it certainly looks and feels like an about turn and a broken promise.

The rationale given for this rise is the difference between the rates of NIC payable by an employee and their employer when compared with a self-employed person, with Hammond labelling this unfair. Is this true, however? Does there not need to be some incentive to be self-employed given the lack of security a self-employed person has when compared to the security enjoyed by an employee? I would certainly argue so.

The other significant announcement was the reduction in the £5,000 dividend allowance (the dividend nil-rate band) to £2,000. This allowance was only introduced on 6 April 2016 and thus it seems to be a case of “he giveth, and he taketh away”. I had expected an increase in the dividend tax rates, which this effectively is.

These two measures, in particular, are there to fund an additional investment into social care. I had predicted some tax hikes to fund such further investment, but I can’t help feeling that these were the wrong areas to focus on.

Other announcements of note included:

  • The announcement that unincorporated businesses with a turnover below the new VAT threshold (£85,000) will have a year’s grace from starting to comply with the new ‘Making Tax Digital’ quarterly filing requirements. The start date has been pushed back to April 2019 for such businesses. Whilst welcome, the tax profession have consistently requested that the proposed £10,000 turnover limit (within which a business is exempt from these filing requirements) be increased to the level of the VAT threshold. This would have been a much more welcome and practical position.
  • An increase to the turnover threshold that a business can use the cash basis of accounting from £83,000 to £150,000.
  • The proposed reduction in the 30 day Stamp Duty Land Tax filing and payment deadline to 14 days has been delayed until post-April 2018.

Overall, it was a dull event, which, whilst predicted, is frustrating. The economy, and particularly the Cornish economy, requires fiscal stimulus to drive growth. We continue not to get anything of the sort. We can only hope that the Budget in the autumn has more to offer.

You can read our full, jargon-busting, summary of the Spring Budget 2017 here.

Updated 9 March 2017

 

If you would like to find out more about these changes and how we at Robinson Reed Layton can assist, please contact our Tax Partner, Steve Maggs, on 01872 276116 or steve.maggs@rrlcornwall.co.uk. You can find previous articles from the Tax Blog here.

This publication has been prepared by Robinson Reed Layton. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific tax advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.

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