The Spring Budget – Winners and Losers!

In March 8, 2017
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Today The Chancellor Philip Hammond unveiled his first Budget, which aims to provide a “strong, stable platform for Brexit.” The Chancellor said he was supporting families while not spending recklessly.

Although the Budget was relatively low-key, other changes were already planned. This adds up to a significant financial impact on millions of families – even before the next Budget in November!

 The Highlights

 

  •  UK second-fastest growing economy in the G7 in 2016
  • Economic growth forecast raised for 2017 to 2%
  • Cash to alleviate the impact of increased business rates on firms
  • National insurance contributions will rise for the self-employed
  • Borrowing forecast cut to £51.7bn in 2016
  • A tax avoidance clampdown totaling £820m

 

The Winners and Losers

 

 Winners

High and Low Rate Tax Payers

The Government remains committed to increase thresholds for Income Tax to Personal tax-free allowance to rise from £11,000 as planned to £11,500 this year and to £12,500 by 2020-21.

The threshold for higher rate will go up from £43,000 to £45,000

Businesses

£435m for firms affected by increases in business rates

£300m hardship fund for small businesses worst affected

Social Care

An extra £2bn for social care over next three years, with £1bn available in the next year

Long-term funding options are to be considered but a so-called “death tax” whereby a person’s Estate would be taxed after death to cover care costs was ruled out.

Families

Funding of £5m to support people returning to work after a career break

Smokers and Drinkers

No increases in alcohol or tobacco duties on top of those previously announced

 

Losers

The Self-employed

It may seem as though the Self-employed workers were the “biggest losers” in the Budget, higher national insurance contributions will increase from its current level of 9% to 10% in April 2018, and then to 11% in April 2019 for those earning more than £8,060.

Tax Avoiders

A tax avoidance clampdown totaling £820m will include action to stop businesses converting capital losses into trading losses, tackle abuse of foreign pension schemes and introduce UK VAT on roaming telecom’s services outside the EU.

There will also be new financial penalties for professionals who promote and enable a tax avoidance arrangement that is later defeated by HMRC.

Shareholders

Director shareholders will see a tax break reduced on the dividends they receive. The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.

 

Our Reaction

This year’s budget provided no real surprises. The growth forecasts for the UK economy are welcome boost in consumer confidence for what the output of the UK economy should look like even with the backdrop of Brexit looming over our shoulders.

The continued clampdown on Tax Avoidance schemes which have become a regular staple of the Spring Budget over the last few years will also be of little surprise to anyone and just supports why at Redwood we never recommend any Tax Planning which involves Loopholes or Tax Avoidance. Tax Planning when done properly, should make sure that you legitimately stick within the framework of the law to reduce your Tax Liability to a fair and reasonable level, without the need to get involved in any Avoidance Schemes.

What was disappointing was the obvious attack on business owners and self-employed individuals with the increase in National Insurance Contribution rates and the aggressive cut in the already controversial dividend allowance from £5,000 down to just £2,000. This will not only affect many self-employed and small business owners negatively, but this will also affect people with large Investment Portfolios as well.

What we already knew…

A long list of changes, announced in previous Budgets and Autumn Statements will come into force in April or the subsequent months. They include:

  • The launch of a new Lifetime Individual Savings Account (LISA) for those aged between 18 and 40. They can save up to £4,000 a year, and the government will add a 25% bonus if the money is used to buy a home or as a pension from the age of 60.
  • Salary Sacrifice restricted for items such as computers, gym membership and health screening.

To Conclude

So yes having already made some of the bigger, more controversial announcements in last year’s Autumn Statement and the previous Budget, the 2017 Budget left one feeling slightly underwhelmed. That does not detract from the fact that many changes previously announced are being implemented as from April this year and as such, all our Investment, Pension and Estate Planning Clients should look to have a review of the impact these changes could have on their Planning.

Thankfully for all of our Clients at Redwood, all of these changes and more will be covered at our Annual Client Review Day on Saturday, 29th April. Please put this day in your diary now and come and join us at the Macdonald Botley Park Hotel & Spa where you will enjoy a two course lunch and the opportunity to review your Planning to make sure your wealth goals are on track for 2017.

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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