No big raid or giveaway in Chancellor’s first, and last, Spring Budget, says accountants James Cowper Kreston

The Chancellor, Philip Hammond delivered his first – and last – Spring Budget today (8 March). With the Autumn Budget a little over six months away it was never going to be a Budget with big giveaways, says Thames Valley and South Coast accountants James Cowper Kreston. And against an economy performing better than the Chancellor could have hoped for, neither was it a Budget raiding pockets to make up any shortfalls.

The winners from the Spring 2017 Budget are small businesses facing big increases in business rates, 16-19-year olds wishing to study technical subjects without wanting to go to university, and technology businesses in the robots, driverless cars and 5G fields.

The losers include the self-employed who now face increases to national insurance, individuals working through their own companies who now face a reduction in tax-free dividends, and individuals over 55 who have taken advantage of new pension freedoms yet continue to contribute to their pension pots.

Sharon Bedford, a Partner specialising in Business Tax at James Cowper Kreston said: “The so-called gig-economy relies heavily on people who all too often have no choice in the way they are employed. And whilst the changes to national insurance are relatively small, they will not affect the national insurance contributions of businesses choosing to employ people in this way.

“Thames Valley technology businesses working in the robotics, driverless cars and 5G spaces will welcome the new funds created to support them. Smaller businesses in rural communities will also welcome the additional £200m to improve rural broadband.”

Sharon adds: “Traffic across the Thames Valley can be painful and whilst the £690m fund to relieve pinch-points is welcome, local authorities will have to compete for it.  It is difficult to see where this will be spent and how much of a difference it will make.”  

Ian Miles, a Partner specialising in Personal Tax at James Cowper Kreston said: “Most of Hammond’s announcements had already been made, but are nonetheless welcome. From April, individuals will benefit from the increase in the personal allowance, changes to the higher rate threshold, increases to the living wage, and the introduction of the lifetime ISA.

“However, from April the over 55s who have taken advantage of the recently introduced pension freedoms will from April be able to claim tax relief on £4,000 contributions to pensions, not £10,000 currently available.”

Winners

• Small businesses facing big hikes in business rates
• The Chancellor has promised a review of business rates before next revaluation.  Help for small businesses coming out of small business rate relief for the first time, with increases capped to £50 a month.  £1,000 discount for all pubs with rateable value under £100,000 (90% of all pubs) and a £300m discretionary fund for local authorities to help businesses
• Personal allowance to increase to £11,500 taking effect from April 2017 – pre-announced
• Higher rate threshold increased to £45,000 taking effect from April 2017 – pre-announced
• Increase to National Living Wage to £7.50 per hour for over 25s
• Life time ISA takes effect from April 2017.Allows 18-40 year olds to save £4,000 saving a year, with the Government adding a £1,000 a year.Can be used to buy first home or keep until 60 - pre-announced
• General ISA limit increase to 20K taking effect from April 2017 – pre-announced
• 16-19-year old students studying technical subjects. Introduction of new qualification called T Levels. Student loan available to those wishing to study technical subjects at a higher level outside of university.
• Businesses developing driverless cars and robotics - £270m fund
• Businesses in 5G mobile tech - £16m fund
• Local communities with poor broadband - £200m
• Local towns with severe traffic problems. Can compete for £690m of cash.
• Adult social care to receive additional £2bn
• Children’s teeth – success of ‘sugar tax’, with drinks manufacturers reducing sugar content

And on International Women’s day – three funds that will benefit women

• Returnships - £5m fund to help those returning to work
• £20m fund to support campaign against violence against women and girls
• £5m to celebrate centenary of women having the vote

Losers

• Self-employed – facing an increase in NIC rates to 10% from April 2018 (11% from April 2019)
• Individuals working through companies – facing a reduction in tax free dividends from £5,000 to £2,000 – from April 2018
• The wider Gig-economy – for example, companies like Uber – who may need to rethink their business models, particularly in light of recent employment tribunal cases that question employment status
• Employees who benefit from salary sacrifice perks – such as smart phones, gym memberships, buying cars or private medical insurance – taking effect from April 2017
• Smokers – A new minimum excise duty of £5.37 on a pack of 20 cigarettes
• People aged over 55 who have taken cash out of their pension but are still earning.The tax relief currently available to them allowed contributions of up to £10,000; Government has slashed this to £4,000
• South East more generally. Pots of money made available for other parts of the country, but South East overlooked
• Accountants – could be penalised if caught promoting questionable tax schemes