The budget: time to 'keep calm and carry on'

keep calm carry onThe budget of 8th March 2017 was a budget of 'firsts' - the maiden budget for the new Chancellor of the Exchequer, Philip Hammond, the first budget since the Brexit referendum and the first of 2017 - for there will be another budget in November as the UK moves to its new fiscal timetable.

Pundits are mixed in their interpretation of the prospects for the UK economy as we approach the formal Brexit disengagement. They are keen to see encouragement for industry to invest and export rather than more of the same debt fuelled consumer expenditure. Has Philip Hammond succeeded in meeting these demands, and will he be able to bank any hard-won savings for this financial year?

 

Click here for a useful summary of a selection of specific tax changes and other budget announcements for 2017-18 and beyond.

A confident outlook

The budget gave a confident outlook about the state of the economy: slightly better for this year than expected. This should send the right message to inward investors. A bit of stability is welcome, especially given the uncertainty we’re facing as we go into negotiations to leave the European Union.

The budget offered few new measures for business, but that is understandable after all the things that were announced at the Autumn Statement.

Attack on the self-employed?

self employed workerUnderstandably the self-employed are already voicing their dissatisfaction at the National Insurance levy on their profits (currently 9pc, will rise to 10pc next year and 11pc in 2019) The Chancellor has effectively abandoned an election pledge; Hammond said he had acted to address a multibillion-pound shortfall in National Insurance, which is due to expand as more Britons choose to work for themselves.

Of course, people aged over 65 do not pay National Insurance at all! For those reaching 65 Class 4 NIC stops at end of the tax year, as it is an annual charge.

The self-employed will also be hit by the slashed tax free dividend allowance (dropping from £5,000 to £2,000 from next year).

The government will consult on enhancing parental leave for the self-employed, although it is unclear what form these proposals will take. Self-employed people do not receive State benefits of Statutory Maternity Pay or Statutory Sick Pay.

These measures will increase tax liabilities for the self-employed but, while they may be considered unwelcome by those affected, they could have been far worse. The government has a strong focus on the 'gap’ that exists between the tax contribution made by the self-employed, and the much higher tax cost of being an employee. It is likely that the Chancellor will seek to further close the gap in future budgets.

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