Summer Budget 2017

Update 16th March 2017

16th March 2017

Chancellor Phillip Hammond yesterday backtracked on his pledge to increase Class 4 NIC during this parliament. Therefore, the rates will continue as follows:

Self-employed

  Class 2 NIC 2017/18 2018/19 2019/20
Profits below £6,025 £0 0% 0% 0%
Profits between £6,026 and £8,164 £2.85 per week 0% 0% 0%
Profits between £8,165 and £45,000 £2.85 per week 9% 9% 9%
Profits above £45,000 £2.85 per week 2% 2% 2%

Class 2 NIC will still be abolished from April 2018 and we await news of how the Chanellor will fund the increased State Pension for the self-employed person.

Updates and changes taken from the recent Budget.

Personal Tax Rates and Allowances

2017/18 2016/17
Personal allowance – tax free income First £11,500 First £11,000
Basic rate band – taxed at 20% Next £33,500 Next £32,000
Higher rate band – taxed at 40% Next £105,000 Next £107,000
Additional rate band – taxed at 45% Income over £150,000 Income over £150,000

 

The Personal Savings allowance of £1,000 for basic rate taxpayers commenced on 6th April 2016 for bank interest received. The banks will stop deducting tax on interest received from this date. The income is still declarable on tax returned with the balance over £1,000 being taxed accordingly.

From April 2017, a £1,000 allowance will be available for property and trading income whereby any income up to £1,000 will be tax free. For those with property or trading income over £1,000, you can either choose to deduct the relevant expenses of the £1,000 allowance to offset against the profit.

If you have savings income, the Savings Rate band of £5,000 remains and as long as you income is below £16,000 (2016/17) and £16,500 (2017/18) then this income will be tax free.

Dividend Taxation

From 6th April 2016, dividend income was taxed in a new way. The rates of taxation are as follows:-

Amount received Tax Rate 2017/18 Tax Rate 2018/19
First £5,000 0% First £2,000 – 0%
Amount within the basic rate band 7.5% 7.5%
Amount within the higher rate band 32.5% 32.5%
Amount within the additional rate band 38.1% 38.1%

 

National Insurance Contributions (NIC)

Employed – weekly rates

  Employee Employer
Earnings below Lower earnings limit (LEL) £113 0% 0%
Earnings between £113 and £157 0% 0%
Earnings between £158 and £866 12% 13.8%
Earnings over £866 2% 13.8%

Self-employed

  Class 2 NIC 2017/18 2018/19 2019/20
Profits below £6,025 £0 0% 0% 0%
Profits between £6,026 and £8,164 £2.85 per week 0% 0% 0%
Profits between £8,165 and £45,000 £2.85 per week 9% 10% 11%
Profits above £45,000 £2.85 per week 2% 2% 2%

From April 2018, Class 2 National Insurance will be abolished. Class 4 National Insurance will be reformed to include an entitlement to State Pension.

VAT Registration Threshold

From 1st April 2017, the registration threshold is £85,000 on a rolling 12 month basis.

Capital Gains Tax

The rates of Capital Gains Tax are unchanged as follows:-

Basic rate tax payers 10% (down from 18%)
Higher rate tax payers 20% (down from 28%)

Capital Gains from property sales will attract the old rates of 18% and 28%.

Corporation Tax Rates

To 31st March 2017 20%
From 1st April 2017 to 31st March 2020 19%
From 1st April 2020 17%

Stamp Duty

The Stamp Duty payable on commercial property purchases changed on 17th March 2016 to the ‘slice-basis’. The rates are as follows:-

First £150,000 of purchase price 0%
Next £100,000 of purchase price (to £250,000) 2%
Balance of purchase price over £250,000 5%

For residential properties, the rates are:-

First £125,000 of purchase price 0%
Next £125,000 of purchase price (to £250,000) 2%
Next £675,000 of purchase price (to £925,000) 5%
Next £575,000 of purchase price (to £1.5m) 10%
Over £1.5m 12%

From 1st April 2016, the Stamp Duty payable on the purchase of second homes will attract an additional 3% charge to the residential rates above.

Employee Termination Payments

From April 2018, termination payments (redundancy pay) above £30,000 paid to employees will attract employers National Insurance. The current rate is 13.8%.

Loans to Participators (Company Directors Loans)

From 6th April 2016, the tax paid on loans to participators (Company Directors) increased from 25% to 32.5%. This tax remains fully refundable once the loan has been repaid in full. The loan must be repaid from taxed income by the Company Director.

Child Benefit

It is important to remember that if you no longer claim Child Benefit you must remain registered within the system in order to obtain your National Insurance Credits for your state pension, even if you do not receive any payments.