This was the first and possibly last Spring Budget for Philip Hammond, as it is to be replaced by a Spring Statement. Despite the shadow of Brexit hanging over the country Mr Hammond made very little mention of it and seemed to be trying to move away from the “Blame Everything on Brexit Culture”.
Similar to the 2016 Autumn Statement this Spring Budget had very little to get excited about, even the fuss over the rise in National Insurance for the Self Employed seems more political point scoring than actual concern at the effective tax rise.
Here are the main highlights:
SELF EMPLOYED CLASS 4 NATIONAL INSURANCE
From April 2018 Class 4 National Insurance that the self-employed pay on profits is to rise from 9% to 10% and then to 11% in 2019. This remains 1% below the employee National insurance contribution rate of 12%.
TAX FREE DIVIDEND ALLOWANCE
It had only been around for 1 year and already it has been largely abolished. Since April 2016 taxpayers have been able to enjoy the first E5,000 of dividend income tax free. From April 2018 this is being reduced to E2,000. This apparent U-turn is to reduce the benefits on small business owners Incorporating and drawing income as dividends from their companies rather than as PAYE salary. It is estimated that for investors in shares, a portfolio paying 65,000 per annum in dividends would be worth E125,000, le yielding 4%.
TAX FREE CHILDCARE
The Government is to roll-out Tax Free Childcare for working families worth up to E2,000 pa for families with children under 12 years of age. From September 2017 the free childcare offer will double from 15 to 30 hours per week for families with 3 and 4 year olds.
The Chancellor confirmed the Introduction of the 3 Year NS&I Savings Bond with a rate of 2.2%. The minimum investment will be E100 and the maximum E3,000 for persons 16 years of age and over.
The ISA Allowance is increasing to E20,000 pa from April 2018 and the Ufetime ISA Allowance goes live from April 2017. This will allow younger savers to save up to E4,000 pa and receive a E1,000 bonus. To receive the bonus the amount saved must be used towards the purchase of a first home or be withdrawn after age 60, as part of pension planning.