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We look at the budget in terms of the impact on our clients from a personal finance perspective and also in terms of the effects on the assets they own through their portfolios with us.

In this budget, many changes were well flagged - which means the market reaction has been muted - and overshadowed by a broadly successful corporate earnings season, which we are in the midst of. Infrastructure play Hill and Smith posted strong results on Wednesday - and Philip Hammond's comments on some extra money to spend on road repairs are of course helpful - but the good numbers and outlook mean that analysts are raising earnings expectations in any event, providing a substantial boost to the shares.

Previous announcements, reiterated by the Chancellor, on further investment into Science, Technology, Engineering and Maths (STEM) have already boosted stocks exposed in this area, such as Abcam, which provides antibodies and other life-science research tools to universities and institutions for medical research. The confirmation of the 18p and 24p sugar levies on drinks, dependent on sugar concentration, are in line again with expectations, although we note a small relief lift in the share price of Nichols (makers of Vimto) since the announcement.

The OBR's projection of an increase in UK growth for 2017 will have only limited impact on client portfolios, given that many of our holdings are internationally diversified companies that look and plan years ahead. Co-ordinated global growth however is of course constructive. What happens beyond the budget - Brexit negotiations, US growth and interest rates, the transition to a consumer-based economy in China - is more important to our long-term investment approach.

From a personal finance perspective, the cut in dividend tax relief from £5,000 to £2,000 will of course make some difference. However, the tax shelter of ISAs remains, with the allowance rising from £15,420 in 2016/17 to £20,000 in 2017/18, encouraging further saving. National Insurance contributions for the self-employed will also rise, something we are sure to hear a lot about from our predominantly self-employed journalist community. The reaction has been vociferous from all sides of the political spectrum and from the press. The Chancellor reckons that he needs to capture taxes from the increasingly self-employed work force that work in the ‘gig economy’, but  it does seem counter to Conservative Party manifesto promises not to raise NI contributions.

Key takeaways

  • The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
  • The main rate of Class 4 National Insurance contributions for self-employed individuals will increase from 9% to 10% in April 2018, and then to 11% from April 2019.
  • A report is expected in the summer from the Chief Executive of the RSA addressing the wider implications of different employment practices.  His preliminary findings are that choices about how people work are primarily made based on tax treatment.  The Chancellor has stated that this should not be the primary driver and is looking to make the tax system fairer and more consistent.
  • A relief package was announced for those most affected by the changes to business rates.
  • A 25% charge will be applied to pension transfers made to qualifying recognised overseas pension schemes (QROPS), with exceptions for genuine transfer needs.
  • The new three-year NS&I bond will offer a return of 2.2% a year on savings up to £3,000.
  • A statutory review of State Pension age is under way with conclusions due to be published in May 2017.


  • From 6 April 2017, the tax-free personal allowance will increase to £11,500 and the higher rate threshold to £45,000.  However for the first time, there will be a disparity between Scottish income tax thresholds and those in the rest of the UK.  While the personal allowance will increase uniformly throughout the UK, the higher rate threshold for Scottish taxpayers will remain at £43,000.


    Dividend allowance

    The tax-free dividend allowance introduced in April 2016 will be reduced from £5,000 to £2,000 from April 2018.  This measure is designed to reduce the tax differential between the employed and the self-employed on the one hand, and those contracting through a company on the other.  


    Class 4 National Insurance contributions (NICs) for the self-employed

    The Chancellor announced that the main rate of Class 4 NICs will increase from 9% to 10% with effect from 6 April 2018 and then by a further 1% to 11% from 6 April 2019. The main rate is applied to earnings between the Lower Profits Limit and the Upper Profits Limit (still to be announced for 2018/19 but £8,164 and £45,000, respectively, for 2017/18). Earnings above the Upper Profits Limit continue to be subject to the additional rate of 2%.

    Class 2 NICs (at a flat rate of £2.85 per week, for 2017/18) are due to be abolished from 6 April 2018 which will coincide with the first rise in Class 4 contributions.


  • The government will provide an extra year before the ‘Making Tax Digital’ online reporting system becomes mandatory for unincorporated businesses and landlords with turnover below the VAT threshold.  Those affected will now have until April 2019 to prepare for the switch to digital record keeping and quarterly updates.

    A consultation will be published in March on proposals for late submission penalties and the charging of interest on late payments, as well as the design of the tax administration system. The aim is to adopt a consistent approach across taxes, which should simplify the system for taxpayers.

    In January 2017, the government announced plans to increase the cash basis threshold for unincorporated businesses, including unincorporated landlords. The cash basis is an optional, simplified form of accounting for calculating the profits of trading businesses with straightforward tax affairs.  From April 2017, the maximum turnover for businesses that wish to start using the cash basis will be increased to £150,000 (currently £83,000), while the exit threshold will be extended to £300,000.  In addition, the government will simplify the rules on capital and revenue expenditure within the cash basis, to make it easier for businesses to work out whether their expenditure is deductible for tax purposes.


  • Legislation will be introduced in the Finance Bill 2017 to apply a 25% tax charge to pension transfers made to QROPS. Exceptions will be made to the charge if people have a genuine need to transfer their pension, including where:

    • both the individual and the pension scheme are in countries within the European Economic Area (EEA)
    • if outside the EEA, both the individual and the pension scheme are in the same country
    • the QROPS is an occupational pension scheme provided by the individual’s employer.

    If the individual’s circumstances change within five tax years of the transfer, the tax treatment of the transfer will be reconsidered. The changes will take effect for transfers requested on or after 9 March 2017.

    Legislation will also be introduced to apply UK tax rules to payments made from funds that have had UK tax relief and have been transferred on or after 6 April 2017 to a QROPS. UK tax rules will apply to any payments made in the first five full tax years following the transfer, regardless of whether the individual is or has been UK resident in that period.


  • Certain smaller businesses will be given help to mitigate the effect of the imminent rise in business rates.  Business rates are calculated based on the rental value of the property the business occupies.  Recent revaluations in England will see rates for some businesses increase significantly from April 2017.  The Chancellor announced three measures to soften these increases.

    • Small businesses which had been able to claim Small Business Rate Relief will have the increase in their rates limited to £600 a year for five years.
    • Pubs with a rateable value of less than £100,000 are to be given a £1,000 business rate discount for one year.
    • Local authorities will be allocated additional funds to help reduce the rates for individual “hard cases”.
  • The Budget reconfirmed the introduction of a new penalty for individuals or entities that enable another person or business to use tax avoidance arrangements that are later defeated by HMRC. 

    In addition, where HMRC identifies inaccuracies in taxpayer documents connected with certain tax avoidance arrangements for tax periods beginning 6 April 2017, the taxpayer will not always be able to rely on having taken advice to demonstrate they have taken reasonable care.  This will apply where the advice is from persons connected with the arrangement, is not specific to the individual’s circumstances or is given by someone without the requisite expertise to provide the advice.  This could affect the level of penalties that HMRC levies for the inaccuracies.

    It was also previously announced that legislation would be introduced requiring failures to declare UK tax liabilities on offshore interests as at 5 April 2017 to be corrected.  Tougher sanctions will be applied where the issue is not addressed before 1 October 2018.

    Further new anti-avoidance measures include the removal of the ability for businesses to convert capital losses to trading losses where assets are being appropriated from capital to trading stock.

    • Extensive changes to the taxation of non-domiciled individuals including the introduction of deemed domicile status for all taxes after 15 years of residence
    • UK residential property to be subject to UK inheritance tax regardless of ownership structure
    • Phased removal of higher-rate tax relief for mortgage interest for buy-to-let investors
    • New £1,000 allowances for low-level property and trading income
    • ISA limit increased to £20,000
    • Introduction of Lifetime ISA permitting savings of up to £4,000 a year with a 25% government bonus, and which can be used to fund the purchase of a first home or be withdrawn after age 60
    • Introduction of the main residence inheritance tax nil-rate band
    • Removal of tax advantage on certain salary sacrifice arrangements such as private medical cover - some protection available for existing arrangements
    • Alignment of employer and employee National Insurance thresholds
    • Reduction in Corporation Tax rate to 19%
    • Reduction in Money Purchase Annual Allowance from £10,000 to £4,000


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