The Budget - 22 November 2017

This was the second budget delivered by Philip Hammond, the first to be delivered in the autumn, and the second during 2017.

This report covers the main changes to taxes and their effect on most people.  It is not intended to be a complete definitive guide to the budget.  All figures are approximate.  If you are looking for a definitive guide then you should try one of the 'Big Four' accountancy firms' websites, or the Financial Times. Alternatively you could try the official budget pages at HM Treasury.

In the author's opinion there was very little in the budget of significance for clients of accountancy firms. Certainly there was plenty in the way of economic forecast figures, but few policy changes that need any input from taxpayers, and many of the changes had already been announced in previous budgets and manifesto commitments.

This report does not discuss changes to fuel, tobacco or drink duty. There's plenty of commentary in the press without us joining in!

The summary below includes announcements from the budget, but also includes changes announced in earlier budgets as these affect the tax system for 2017-18 and later.

Income Tax

Dividends

National Insurance

Savings

Corporation Tax

Personal Service Companies

Capital Allowances

Capital Gains Tax

Property taxes

Buy to Let Mortgage Interest

VAT

Landlords

Child Benefit

Income Tax

The following income tax changes have been announced:

• The personal allowance for tax free income increases by £350 to £11,850 from April 2018.
  
• The higher rate tax threshold (the amount of income above which people pay tax at 40%) increases by £1,350 to £46,350 from April 2018.
• The personal allowance will continue to be reduced for taxpayers with income exceeding £100,000.  The allowance will reduce by £1 for every £2 of income over £100,000.  This has the effect of creating a 60% tax band between £100,000 and £123,700 for 2018-19.
• The top rate of tax remains at 45% for taxable income exceeding £150,000.
• The transferable tax allowance for married couples increases to £1,185 for 2018-19.

Dividends

There were no changes announced to the taxation of dividends. The rules from April 2018 therefore remain as:

• The first £2,000 of dividends are tax free.
• Dividends not covered by the £2,000 tax fee allowance are taxed at 7½% for basic rate taxpayers, and 32½% for higher rate taxpayers.

Savings

There were no changes announced to the taxation of savings. The rules therefore remain as:

• The first £1,000 of interest is tax free for basic rate taxpayers, or £500 for higher rate taxpayers.
• The ISA savings limit remains at £20,000.

National Insurance

National insurance remains unchanged.

Class 2 National Insurance (paid by the self employed) will be abolished from April 2019 in accordance with earlier announcements.

No mention was made in this budget of the Chancellor's flagship policy from the March 2017 budget of increasing Class 4 National Insurance. (This policy was hastily cancelled a few days after that budget).

Corporation Tax

The reduction in corporation tax rates that were announced during 2015 and 2016 started to take effect from April 2017. The rate reduced from 20% to 19% in April 2017 and will reduce again to 17% in April 2020.

The indexation allowance on capital gains within companies will cease from 1 January 2018. For gains after that date the allowance will be given up to December 2017, but not beyond then.

In 2016 the Chancellor announced that losses incurred from April 2017 that are carried forward will be able to be used against profits from other income streams.  However if profits exceed £5m the amount of profits that can be offset by losses carried forward will be restricted to 50%.

The amortisation of goodwill purchased after 8th July 2015 will not be allowed as a deduction against corporation tax.

Personal Service Companies

There were no announcements about changes to tax law on personal service companies. Legislation known as "IR35" has been used to address the use of personal service companies for some years.

From April 2017 individuals working through their own company in the public sector (defined as government departments, education institutions, the police, and bodies such as the British Museum, BBC, Channel and Transport for London) have not been responsible for paying the relevant tax and national insurance as this responsibility moved to the public sector employer applies the IR35 rules in their calculations.

Capital Allowances

In his July 2015 budget the Chancellor set the Annual Investment Allowance (which has varied enormously over the last few years) at a "permanent level" of £200,000 from January 2016. This "permanent" rate remains in force.

Capital Gains Tax

The Capital Gains Tax rates remain unchanged at 20% for gains made by higher rate taxpayers on non business assets, and other gains are taxed at 10%.  However gains made on residential property remain at the old rates of 18% and 28%.

The Annual Exempt Amount increases from April 2018 by £400 to £11,700.

Inheritance Tax

The July 2015 budget announced that an additional £350,000 family home allowance will be phased in over four years from April 2017, taking the total allowance for a couple to the promised £1m.

Property Taxes

Stamp Duty Land Tax rates were overhauled in the 2014 Autumn Statement.  The new rates for individuals are available here.

In 2013 a new 15% rate was introduced on properties costing over £½m purchased through a company.

From April 2016 an additional 3% is payable on the purchase of second homes.

From April 2013 a Residential Property Tax will be payable by companies on real estate held in a corporate structure.  The annual levy is based on the property value and varies from £15,000 for properties valued at £2m, and increases to £140,000 where the property is valued at £20m.  Since 2013 additional bands have been introduced so that properties valued at over £½m are now included.

Mr Osborne announced changes to commercial stamp duty coming into force on 17 March 2016.  The new rates for commercial property are available here.  This is a tax  reduction for small value transactions, but an increase for high value ones.

The Chancellor's big announcement, at the very end of his speech was the introduction of a £300,000 nil rate band for stamp duty for first time buyers from midnight on 22 November 2017.

VAT

There was no change to VAT rates.

The registration threshold is now £85,000 and will remain so for the next 2 years. However the Chancellor said he would consult on whether to bring this threshold down. The author can't help wondering whether this desire to reduce the registration threshold is a sneaky way to bring more businesses into Making Tax Digital.

Landlords

In recent years there have been a a number of announcements which are seen by landlords as a direct attack on them. This budget made no mention of the buy to let market.

Child Benefit

There were no changes to the high income child benefit charge.

The reduction in child benefit for households where one or more people earn over £50,000 came into effect in January 2013 having been announced in the 2011 budget and amended in the 2012 budget. 1% of the child benefit is withdrawn for every £100 the highest earner in the family's income exceeds £50,000, so all child benefit is paid back to the government if income exceeds £60,000.

Summary

This was a very quiet, steady as she goes budget, with no major upsets. The Chancellor's main target was to fix the housing market. It will be some years before we can see how successful he was.

Cookies: This website does not use cookies. No personal data is collected by this website.
Our Website Privacy Notice is available here.