Top five takeaways from Spring Budget 2017

Top five takeaways from Spring Budget 2017

Following chancellor Philip Hammond’s Spring Budget speech, we explore the key takeaways for businesses and individuals

Following chancellor Philip Hammond’s Spring Budget speech, we explore the key takeaways for businesses and individuals.

Business rate concessions and a hint of reform

With the revaluation of business rates causing widespread concern among the business community, Hammond sought to soften the blow for some, with concessions offered to small businesses, pubs and local authorities.

However, many believe that the chancellor could have done more to drive reform to the system.

Michael Wistow, partner in the global tax practice at law firm White & Case said: “The mitigation measures announced to remove hardship are better than nothing, but are only adding sticking plasters to a tax that is clearly failing, and needs proper, urgent reform.”

While committing to consulting on business rates reform before the next revaluation in 2022, BDO said the chancellor’s biggest headache was yet to come.

“His next job will be to tackle the unfair tax disparity of traditional and online retailers; an issue that is adding to the huge pressure already faced by high street retailers,” said BDO tax partner David Brookes.

“I wouldn’t be surprised if the government introduced some form of additional new tax on the ‘digital real estate’ of large online retailers,” he added.

Applause for stability

Hammond said himself that he had been “listening to the voice of business”, and the chancellor delivered on UK business’ request for stability, according to KPMG.

Michelle Quest, head of tax at KPMG in the UK said: “With the major annual fiscal event moving to the autumn from this year, today’s announcement seemed to have more of a feel of a Spring Statement than a full scale Budget with few major changes announced, particularly for UK corporates.

“Philip Hammond demonstrated government was listening to businesses wish for stability and calls to simply the tax system as well as reiterating that the UK will continue to be competitive on the international stage. Other than some targeted anti-avoidance changes that were largely previously announced, UK business will be relieved to have the breathing space to deal with current changes taking effect during this year.”

“Overall, this Budget announcement showed Philip Hammond to be a chancellor who prefers consultation with what seems to be a more measured and sensible approach to policy development,” she added.

In agreement, Bill Dodwell, head of tax policy at Deloitte, said that the few tax changes announced by the chancellor should be “applauded”.

Dividend tax the ‘biggest Budget surprise’

In possibly the “biggest Budget surprise”, according to Mike Hodges, partner at Saffery Champness, the tax-free dividend allowance is set to be reduced from £5,000 to £2,000 from April 2018. Introduced only last year, the reduction aims to limit the number of individuals operating through personal companies.

“Whilst Mr Hammond said this change is aimed at director/shareholders, the reduction isn’t limited to these individuals, but applies to all shareholders receiving dividend income,” said Hodges.

“The £5,000 limit itself was introduced to soften the impact of increases in the headline rates of tax applying to dividend income. While the ISA allowance and personal allowance are going up, this new move from the chancellor could see an additional bill of £1,000 and more for some shareholders who have done the prudent thing and made provision for a secure financial future.”

National insurance contributions (NICs) shake-up

In his budget speech, Hammond said that “the difference in national insurance contributions is no longer justified by the difference in benefits entitlement”, and that “dramatically different treatment” between employees and self-employed workers “undermines the fairness of the tax system”.

The abolition of Class 2 NICs is still scheduled to go ahead in 2018, with Hammond choosing to increase the main rate of Class 4 NICs for the self-employed by 1% to 10% in 2018, with a further increase of 1% in 2019.

“Gig economy workers who are self-employed have been hit with a phased 2% tax rise. Although bad news for those individuals affected, it does level the playing field. Aligning NIC takes tax out of the decision-making process for people choosing whether to be employed or self-employed. And it will give a £2bn boost to the Treasury’s coffers to 2022,” said BDO partner Brookes.

Stamp duty a ‘missed opportunity’

Stamp duty is the “missed opportunity” in the chancellor’s Budget, according to Berwin Leighton Paisner partner John Overs.

“The chancellor missed an opportunity to address the problems caused by the stamp duty reforms and rate increases introduced in the last couple of years. These are causing both problems for the housing market at all levels and losing revenue for the government,” he said.

Charles Beer, managing director of Alvarez & Marsal in London agreed: “Property taxation in the UK – from business rates to council tax, stamp duty, CIL and s106 – needs fundamental long-term reform.”

Whether Hammond addresses the issue in the Autumn Budget remains to be seen.

Looking ahead

Hammond’s first, and last, Spring Budget contained no big surprises, with announcements on business rates and measures for the self-employed expected by the business community. We now look to the Autumn Budget for further clarification on reforms, and for indication of Hammond’s long-term policy.

The chancellor’s movements will be closely followed over the next few months, with Hammond himself seemingly nervous about the future.

“As the House knows, this will be the last Spring Budget.

The Treasury has helpfully reminded me that I am not the first chancellor to announce the ‘last Spring Budget’.

Twenty-four years ago Norman Lamont also presented what was billed then as ‘the last Spring Budget’.

He reported on an economy that was growing faster than any other in the G7, and he committed to continued restraint in public spending.

The then prime minister described it as the ‘right budget, at the right time, from the right Chancellor’.

What they failed to remind me was…ten weeks later, he was sacked!

So wish me luck!”

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