Autumn Budget 2017: Key points for contractors & the self-employed
As you will no doubt be aware, Philip Hammond revealed his Autumn Budget yesterday afternoon, with the main focuses being on technology, the NHS, the environment and property as well as the continuing reduction in national debt.
The key areas of note are detailed below:
- The rumoured changes in respect of IR35 in the private sector did not occur in this budget, which will come as a great relief to many contractors! However, it was implied that further consultation will take place with regards to tax avoidance which may lead to developments in the future.
- The personal allowance for individuals will increase from £11,500 (2017/18) to £11,850 in 2018/19. Furthermore the higher rate threshold will increase from £45,000 to £46,350 in 2018/19. These increases are showing continued progress towards the planned personal allowance of £12,500 and higher rate threshold of £50,000 by 2020.
- The National Living Wage for those aged 25 and over, will be increased by 4.4% from £7.50 to £7.83 per hour from April 2018. This will result in an approximate annual increase in pay of £600 for full time workers.
- The current tax free dividend allowance of £5,000 will reduce to £2,000 from the 2018/19 tax year – this plan was already in place and has not been revised.
- Enterprise Investment Scheme relief will be doubled for investments in qualifying technology companies. This will allow 30% income tax relief on investments of up to £2,000,000 in these companies.
- From April 2018 there will be no Benefit In Kind (BIK) for people who charge their electric vehicles at their workplace.
- From April 2018 the applicable BIK percentage for diesel company cars will increase by 1%. The additional supplement will therefore increase from 3% to 4%.
- The rumoured reduction in the VAT registration threshold did not materialise. The current threshold of £85,000 will remain in place for the next two years however consultations will take place to identify where the current system can possibly be improved.
- The Research and Development Expenditure Credit will increase to 12% of qualifying expenditure (from 11%) for large companies from April 2018. This will also apply to SMEs who are sub-contracting for larger companies.
- Corporation Tax will remain at its current rate of 19% until 1st April 2020 at which point it will be reduced to 17% as planned.
- Corporation Tax losses can continue to be offset against 100% of profits of up to £5 million. For profits in excess of this, losses can only be offset against 50% of profits.
- Indexation allowance in respect of a company’s chargeable gains will be removed from January 2018 onwards.
- Increases in respect of Business Rates will be linked to CPI as opposed to RPI from 2018 which will provide relief to many businesses.
- The £1,000 discount on business rates for pubs which took effect from 1st April 2017 remains available.
- From today, Stamp Duty has been abolished for first time buyers when purchasing a property up to the value of £300,000. For those first time buyers in more affluent areas where house prices are much higher, no Stamp Duty will be payable on the first £300,000 of a property with a purchase price of up to £500,000. Stamp Duty will apply as normal for any first time buyers purchasing a property with a value in excess of £500,000. This will lead to a cut in Stamp Duty for 95% of first time buyers and eradicating it completely for 80% of first time buyers.
- From April 2018, Vehicle Excise Duty to rise by one band for diesel cars which do not meet latest standards. This increase will not apply to vans.
- Any increase to cigarette/tobacco prices will be at inflation plus 2%.
- Duty on alcohol has been frozen.
- The planned rise in fuel duty in 2018 has been cancelled until further notice.
- Local authorities will be given the power to charge a 100% Council Tax premium on empty properties. This is aimed at tackling the current number of people who are living rough on the streets of the UK. By potentially doubling the Council Tax which owners of empty properties will have to pay, it may encourage them to rent the properties out or communicate with local authorities with a view to opening them up to people without shelter.
- In order to tackle online VAT fraud relating to any goods/services supplied via an online marketplace, the marketplace (e.g. Amazon, eBay, Google etc.) will be jointly liable to ensure that the seller accounts for the VAT correctly. This will ensure a fairer system for retailers who do not operate through an online marketplace.
- As part of a tax avoidance clampdown, digital royalties relating to UK sales which are paid to low tax jurisdictions will be subject to income tax in the UK.
- A new railcard will be introduced for those aged 26 to 30 which will provide up to a third off certain rail fares (subject to conditions). This is an extension to the existing Young Persons railcard for those aged between 16 and 25.
As your accountant, we’re here to guide you through any legislative changes that may affect you and your company.
If you have any questions on how the budget will affect your company please do not hesitate to contact your accountant. You can also download the full report below.