March 10. 2017
The Spring
Budget 2017 was presented by the Chancellor of the Exchequer on 8th
March 2017.
This will be
the last Spring Budget. In future, the Budget will be held in autumn,
commencing from autumn 2017. Many of the changes announced in the Budget
commence the following 5th April, giving more time for planning and
implementation.
With regards
to proposals specifically affecting the driving instructor industry, the
Chancellor has announced a 2% increase in Insurance Premium Tax from June 2017
which will, of course, impact Car Insurance premiums.
Significant
changes are also coming in respect of Vehicle Excise Duty (VED). From 6th
April 2017, for cars registered after 1st April 2017, there will be
a first-year rate of up to £2,000, depending on the vehicles’ CO2 emissions and
then a standard rate of £140. The standard rate will be increased in the first
five years by £310 if the vehicle list price is more than £40,000.
For vehicles
registered between 1st March 2001 and 31st March 2017,
VED will increase by Retail Price Index (RPI) from 6 April 2017. The average
increase will be £5 per year.
From an
individual taxpayer’s point of view, the following points were the key
announcements made:
Personal Tax
rates and allowances
The
personal allowance will increase from £11,000 to £11,500 from 6th
April 2017.
This
increase is part of the Governments’ continued commitment to increase the
personal allowance to £12,500 by the end of the current parliament.
The
threshold at which the personal allowance is reduced remains at £100,000. The
personal allowance is reduced by £1 for every £2 of income above £100,000. This
means that anyone with income over £123,000 in 2017/18, does not qualify for
personal allowances.
From 6th April
2017, the threshold at which individuals begin to pay tax at the higher rate of
40% will increase from £43,000 to
£45,000. This increase is part of the
Government’s continued commitment to raise the threshold to £50,000 by the end
of the current parliament.
The
threshold at which individuals will be liable to pay tax at the rate of 45%
remains at £150,000.
Married
Couples allowance will continue to be available where one applicant was born
before 6th April 1935 and from 6th April 2017 neither
applicant earns more than £28,000 (£27,700 in 16/17).
From
6th April 2018, this will result in a minimum tax saving of £326
(£322 in 16/17) and the maximum tax saving of £844.50 (£835.50 in 16/17).
Those
who don’t qualify for Married Couples allowance, may qualify for Marriage
Allowance. To qualify for Marriage Allowance one applicant must not be a
taxpayer and the other must not be a higher rate taxpayer. From 6th
April 2018, this will result in a tax saving of £230 (£220 in 16/17).
Capital gains
tax (CGT)
From 6th April
2017, the annual exemption for CGT will increase to £11,300 (£11,100 in 16/17).
The rates of CGT remain
unchanged at 10% for basic rate taxpayers (18% for residential property) and 20%
for higher rate taxpayers (28% for residential property).
Savings
Since 6th
April 2016, all bank and building society interest has been paid gross.
If your non-savings income is
below the tax free personal allowances detailed above, then the balance can be
used against savings income.
In addition to any “spare”
personal allowances, basic rate taxpayers can earn a further £6,000 of savings
income tax free and higher rate taxpayers can earn £5,500.
The ISA allowance will rise
from £15,240 to £20,000 from 6th April 2017.
The ISA allowance also
includes, from 6th April 2017, a new Lifetime ISA allowance. This
will allow those under 40 years old to invest up to £4,000 per year and receive
a bonus of 25% up to a maximum of £1,000 each year. Deposits can be made every
year up to the age of 50. The funds can then be withdrawn from the age of 60.
Funds can be withdrawn earlier if they are going to be used for a first-time
house purchase. They can also be used if
you are terminally ill or are moving to a different Lifetime ISA provider. If
you withdraw for any other reason before the age of 60 then you will have to
pay a charge of 25% of the amount withdrawn.
There is also a “Junior ISA”
available for under 18’s. From 6th April 2017, up to a maximum of
£4,128 (£4,080 in 16/17) can be invested.
From 6th April 2017, the
tax-free lifetime allowance on contributions to pension pots remains at £1
million and the maximum annual allowance limit remains at £40,000.
Dividend Income
Savings income does not
include dividend income.
From 6th April
2017, the first £5,000 of any dividend income will be taxed at 0%. Above this
threshold, basic rate taxpayers will pay 7.5% dividend tax, higher rate
taxpayers 32.5% and additional rate taxpayers 38.1%.
From 6th April
2018, the limit will be reduced to £2,000.
National Insurance Contributions (NIC’s)
From 6th
April 2017, Class 2 NIC’s will be due on profits in excess of £6,025 (£5,965 in
16/17). This equates to a weekly rate of £2.85 (£2.80 in 16/17).
From 6th
April 2017 Class 4 NIC’s will be due on profits in excess of £8,164 (£8,060 in
16/17) at the rate of 9%, which is unchanged from 16/17. Profits above £45,000
(£43,000 in 16/17) will be liable at 2%.
Class 2
NIC’s will be abolished from 6th April 2018 and the self-employed
will only pay Class 4 NIC’s. The change
will see an increase in Class 4 NIC’s to 10% from 6th April 2018 and
to 11% from 6th April 2019.
However, due to public outcry from the ‘white van man’, the legislation for the proposal will not now likely to be introduced until autumn 2017.
Other notable points
The
Corporation Tax rate for Limited companies will be cut to 19% from April 2017
and to 17% from April 2020.
The VAT
threshold will increase from £83,000 to £85,000 from 1st April 2017.
Capital
allowances for plant and machinery will remain at 100% for first £200,000 of
first year additions (FYA). The main rate will remain unchanged at 18% and the
special rate will remain at 8%.
Trading and property income allowances
- The Government will create two
new income tax allowances of £1,000 each, for trading and property income.
The allowances can be deducted from income instead of actual
expenses.
Making Tax Digital (MTD)
HMRC have
confirmed that from 6th April 2018 the self-employed whose turnover
or property income is over the VAT threshold (£85,000), will have to submit
their business records quarterly with non VAT registered businesses joining MTD
from 6th April 2019.
An
exemption has been proposed for businesses with a turnover of below £10,000.
However, HMRC are still considering this proposal.
If you would like to chat to us about how any of the above will affect you, then please contact us here.