The Chancellor, Philip Hammond, used his first and last Spring Budget to make a few final significant changes, despite promising in the 2016 Autumn Statement that further March reviews would only normally comment on the Office of Budget Responsibility’s (OBR) forecasts!

The big changes were in respect of National Insurance contributions for the self-employed (which has subsequently been reversed), the tax-free dividend allowance, the Money Purchase Annual Allowance and a 25% tax charge on non-permitted overseas pension transfers and are detailed below:

  • National Insurance contributions (NICS) for the self-employed – It was confirmed that the tiered Class 2 NICS will end in April 2018. It was also intended that the remaining Class 4 NICS, which work on a proportionate rate would increase by 1% in both April 2018, to 10% overall, and April 2019, to 11% overall, prior to the Chancellor’s U-turn on 15 March.
  • Tax-free dividend allowance will reduce from £5,000 currently to £2,000 from April 2018. The Chancellor’s explanation that this was to remove some of the tax advantages of the self-employed incorporating, however interestingly was not directed at just one or two person companies, but everyone. The reduction means that there is still an incentive to receive dividends, rather than earnings, for these individuals, but largely only as NICS are not payable on dividends.
  • Although not detailed in the Chancellor’s speech, the website confirmed that the Money Purchase Annual Allowance (MPAA) will reduce from £10,000 to £4,000 from 6 April 2017, as previously suggested. See our website, following the associated consultation response on 20 March 2017, to clarify the changes in full.
  • The Government has acted to attempt to reduce the number of transfers to Qualifying Registered Overseas Pension Schemes (QROPS) where they suspect tax avoidance is the principle reason. Further information will follow on our website, however in short any QROPS transfers made after 8 March 2017 will be subject to a 25% tax charge, in addition to any Lifetime Allowance tax charge due, unless:
    • Both the individual and QROPS are in the same country
    • The QROPS is in one country in the European Economic Area (EEA) and the individual is resident in another EEA country
    • The QROPS is a pension scheme associated with an individual’s employment

Otherwise the changes were less significant, with:

  • OBR forecasts more positive than at the time of the 2016 Autumn Statement, with:
    • GDP growth forecast up in 2017/18 from 1.4% to 2%, but down for the next three, to 1.6% in 2018/19, 1.7% in 2019/2020, 1.9% in 2020/2021 and 2% in 2021/2022
    • Debt forecast at 86.6% of GBP in 2016/17, 88.8% in 2017/2018, 88.5% in 2018/2019, 86.9% in 2019/2020, 83% in 2020/2021 and 79.8% in 2021/2022
    • Inflation forecast to be 2.4% in 2017/18, 2.3% in 2018/2019 and 2% in 2019/2020
  • Confirmation that the NS&I Investment Bond, unveiled at the 2016 Autumn Statement, will offer 2.2% gross interest over a 3 year term. With this being available for 12 months from April 2017, for subscriptions of between £100 and £3,000.
  • The following changes to Business Rates:
    • A cap on those businesses no longer subject to the Small Business Rate Relief, limiting increases to £50 per month
    • A £1,000 discount on the rates in 2017 on public houses with a rateable value of less than £100,000
    • An additional £300m fund to help with individual cases of hardship due to the upcoming Business Rate increases
    • A consultation on the revaluation process to try and make it smoother and more frequent in the future
  • Some additional funding for the NHS, with:
    • £2bn additional funding over the next 3 years to help with social care in England, with the aim of freeing up more beds in hospitals
    • A green paper on social care and long-term care in the NHS
    • A further £100m to be made available to have more GPs in A&E departments by next winter
  • Schools and young people to benefit from:
    • A further funding for 110 free schools
    • Free school transport for all children with free school meals to selected schools
    • An additional £216m over the next 3 years to help with school repairs and rebuilds
    • An introduction of T-Levels for 16-19 year olds wanting a technical alternative to A-Levels, plus an intention to improve the quality of existing qualifications and with more support for these
  • More funding for transport, with additional funding into ‘pinch points’ and urban congestion

Noticeable was the lack of further changes to Income Tax rates and thresholds other than those previously promised, no change to the Lifetime Allowance and Annual Allowance, with tapering remaining for those earning more than £110,000; and no change in pension tax relief, which remains available at an individual’s highest rate.

This article is based on our interpretation of the Chancellor’s speech and on initial documentation available on the website, which cannot be guaranteed and could be subject to change.

09/03/2017 (updated 15/03/2017)