Good or bad news: what does the latest budget mean for you?
Is it good or bad news? We’ve all had a couple of weeks to digest our thoughts on the latest budget. This post rounds up some of the key changes proposed by Philip Hammond and his Government colleagues.
Here at Whyfield, we feel that Hammond has been working hard to create a fiscally tight budget that aims to Brexit proof the economy as much as possible! It’s likely that this will create challenges in the short-term, but should help the country deal with the upcoming economic uncertainty from the best position possible…
Hammond is a former businessman, so many of us were surprised when he announced that the tax-free allowance on dividends will be cut from £5000 to £2000 in April 2018.
This new policy will form a key part of the new Conservative Government’s long-term plans to bring taxation amongst the self-employed in line with taxation of the employed. Hammond argues that the self-employed currently pay far less tax than the employed and that this is not fair.
This change in policy is estimated to adversely affect over 2.2 million people in the UK. Around half of those affected are company directors and the other half are shareholders. It is likely to have a significant impact upon those of us that are using dividends to fund retirement.
How will changes to Savings and Pensions affect you?
Savers suffering from low interest rates will be pleased to hear that a new NS&I bond has been launched. It will pay 2.2% on deposits up to £3000, which won’t make us rich, but does beat many of the low interest rates available on the high street today.
The Government has continued in its mission to crackdown on offshore tax avoidance. Those wishing to move a UK pension offshore will face a 25% tax charge from March 2017. There are terms and conditions attached, so it won’t apply to everyone. Do get in touch with Whyfield if you have any questions about this change and we can point you in the right direction.
Related to this, savers cashing in pensions are generating almost 5 times more in tax revenue than the Treasury expected. As a result, Hammond noted that he has rather cautiously upgraded its forecast of tax revenues from pension changes for 2017-2018 to £1.6 billion from an initial forecast of £910 million.
This is an unexpected result of pension holders over 55 years of age with defined contribution schemes have been allowed to access their money early, whilst only needing to pay tax at a marginal rate. Prior to April 2015, this rate was 55% for early withdrawals. It was widely anticipated that most people would choose to withdraw small amounts over a period of years, but instead, people are taking far larger withdrawals than originally expected. This has provided a greater level of income for the Treasury.
How will changes to Business Taxation affect you?
As expected, there are several changes to business taxation. The main topic on the agenda was business rates. There will be a £435 million fund for firms affected by increases in business rates. This is likely to provide a small amount of relief for those predicted to suffer the most from the rises.
Furthermore, the rate rises for firms losing existing relief will be limited to £50 per month for many businesses, which will be helpful, at least in the short-term.
The Government is increasing its measures against tax avoidance. They are taking action to prevent businesses from converting capital losses into trading losses. This is estimated to raise £820 million for the Treasury when combined with other tax avoidance measures. It is likely that this change will affect several of out clients. We’re happy to chat more if this is something that you are concerned about.
In other news, privately-owned SMEs may be pleased to hear that they will receive one extra year to prepare for tax digitisation and quarterly reporting. Much of Whyfield’s work is already online, but the extra year will undoubtedly reduce the pressure on businesses that have not yet found the time or resources to go digital.
Finally, the personal tax-free allowance will rise to £11,500 this year, as planned.
Review of North Sea Tax Rules
Offshore workers will have been interested to hear that a review of North Sea tax rules has commenced. A specialist panel will consider ways of making it easier to buy and sell oil and gas fields. It is hoped that this will support the industry by enabling them to remain in production for longer. It’ll be interesting to see how it goes…
We hope that this post-budget round-up was interesting and informative! As always, we are happy to answer any queries or questions about how this budget will affect you. You can get hold of one of our accountants in Truro by telephoning (01872) 267267 or visiting the contact us page on the website.