Personal Tax and miscellaneous matters
Personal Tax allowance
The personal allowances for 2017-18 is £11,500 (2016-17: £11,000).
The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,150 in 2017-18. Couples can only make a claim if one partner has spare personal tax allowance and the other is a basic rate tax payer.
Income Tax rate bands
The levels for 2017-18 are:
- For 2017-18 – £45,000 (the UK apart from Scotland)
- For 2017-18 – £43,000 (Scotland)
If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).
The threshold at which the 45% rate starts is unchanged at £150,000.
For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).
Dividend allowance to be reduced
From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.
Capital Gains Tax (CGT)
There are no changes to the basic CGT rates for 2017-18. The CGT on the disposal of chargeable assets, apart from residential property, remains at:
- 10% on disposals that form part of the basic rate band.
- 20% on disposals that form part of the higher rate band.
The higher rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt. The annual exempt amount for 2017-18 is £11,300 (2016-17: £11,100).
Money Purchase Allowance reduced to £4,000 from £10,000
This will restrict the amount of tax relieved contributions that can be made by an individual, into a money purchase arrangement, who has accessed their pension savings from April 2017.
Reminder for non-doms to be bought into the IHT net
A reminder, that from April 2017, Inheritance Tax will be charged on all UK residential property even when indirectly held by a non-domiciled person through an off-shore structure.
Duty on wine, beer, spirits and alcohol will increase in line with the Retail Prices Index from 13 March 2017. These measures will typically add 2p to the price of a pint of beer, 1p to the price of a pint of cider, 36p to a bottle of whisky and 10p to a bottle of wine.
Tobacco duty rates
Changes to excise duties mean that a pack of twenty cigarettes will increase by an average of 35p, an additional 17p per 10 grams of cigars, and a 35-gram pouch of tobacco by 42p.
There will be no increase in fuel duties. At the end of 2017-18 this will be the 7th year fuel duty has been frozen.
New National Savings investment clarified
From April 2017, individuals aged 16 years or older will be able to invest in the new NS & I Investment Bond. It will be available for one year from April 2017. Minimum deposit is £100, maximum deposit allowed £3,000. The rate of interest applied is 2.2%.
Lifetime ISA previously announced
From April 2017, any person aged from 18 to 40 will be able to save into a new Lifetime ISA until the age of 50.
Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.
Some or all of the money can be used to buy a first home, or it can be kept until age 60.
Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.
After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 25% charge.
ISA limit from April 2017
The ISA savings limit for 2017-18 is confirmed as £20,000.
Business tax changes
Corporation Tax rate
The main rate of Corporation Tax from 1 April 2017 will be reduced to 19%. A further reduction has been announced to 17% from 1 April 2020.
NIC increases for the self-employed
To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.
The increases are:
- From April 2018, an increase from 9% to 10%, and
- From April 2019, a further increase from 10% to 11%.
The earlier increase is timed to coincide with the cessation of Class 2 contributions.
Business rates increases
In response to the negative publicity regarding increases in business rates in England, particularly for retailers, the Chancellor has stepped in with help for smaller businesses.
There are three areas of relief announced:
- Small businesses that find they are losing Small Business Rates Relief from April 2017, will have any annual rates increase capped at the higher of £600 or the transitional relief cap.
- Local authorities will be funded to provide an element of discretionary relief, and
- Public houses with a rateable value of up to £100,000 will benefit from a fixed £1,000 business rate discount – subject to State Aid limits if multiple properties are owned. This discount is available for one year from April 2017.
Local authorities will be fully compensated for any loss of income because of these measures.
Making Tax Digital
The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019.
Changes to trading and property income allowances
The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.
Loss relief reform
Legislation is to be introduced to reform the rules governing corporate losses carried forwards from earlier periods. The changes will:
- Allow more flexibility by relaxing the way companies can use carried forward losses from 1 April 2017.
- Restrict the set-off of losses such that profits cannot be reduced by more than 50%. This restriction will apply to companies or groups with profits of more than £5m.
Corporation Tax relief for museums and galleries
Rates for 2017-18, already announced, are 25% for touring exhibitions and 20% for non-touring exhibitions. Following consultation, the draft legislation is to be amended to allow for exhibitions that have a performance element, but where the live performance is not the main focus of the exhibition.
VAT registration and deregistration limits
From 1 April 2017:
- Registration threshold increased to £85,000
- Deregistration threshold increased to £83,000
Avoidance and evasion
The government will continue to challenge and seek to overturn artificial arrangements whose sole purpose seems to be a reduction of tax.