The Chancellor appeared in fine form as he delivered his first of two 2017
Budgets, with the annual event moving “permanently” to the autumn later this
year. The movement in the OBR’s growth forecasts have certainly been a positive
for him. Confident in his delivery, perhaps to the point of cockiness; the
jokes were very much at the expense of the leader of the opposition.
The most striking tax measures were the changes to the main rates of NICs for
the self-employed (which will rise from 9% currently to 10% in April 2018, and
11% in April 2019), and to the dividend exemption (which will fall from £5,000
to £2,000 from April 2018). These are being introduced to close the gap between
the taxes on the employed, the self-employed, and those working through a
limited company.
To the small incorporated business person, who takes money out of their
company as a low salary and then dividends, the total impact of the dividend
exemption change will be just £225, assuming that they have little or no other
income. For those with substantial other income such as rents, the impact could
be as much as £975 or even £1,143, but those cases will probably be in the
minority.
The NICs change might cost as much as £837 a year by the end of the
parliament.
However, these changes miss the main differentiating factor between these
methods of working, being Employer’s NICs. With the level of build-up given, I
was expecting worse, fearing that Mr Hammond might impose the entire cost of
Employer’s NIC on a self-employed worker, or apply the new personal service
company rules for the public sector to the private sector. Perhaps this topic
will be revisited again.
Vitally, we have finally been informed about the start dates for Making Tax
Digital. The implementation for unincorporated businesses and landlords with
turnover below the VAT threshold will be delayed by a year until April 2019,
whilst those with turnover below £10,000 remain exempt. However, unincorporated
businesses and landlords with turnover above the VAT threshold will still enter
the system from April 2018, and need to start making plans soon.
Finally, support for those losing out under Business Rates revaluation is
welcome. Here, we will see a cap on the increase for those businesses losing
Small Business Rates Relief, a £300m fund for discretionary relief in England,
and relief for pubs with a rateable value below £100,000. Longer term plans for
a larger reform of the system cannot come soon enough.
