Philip Hammond's first (and last) Spring Budget is overshadowed by the imminent triggering of Article 50 and big questions over the UK's global economic future outside the EU.
“The Chancellor likes detail, and that's where the devil is,” said Andrew Browne, Bishop Fleming's head of tax, who claimed the Budget headlines hid the true nature of this year's tax changes, particularly for unincorporated businesses facing a rise in National Insurance and company owners facing a rise in dividends tax.
Mr. Browne commented that Mr. Hammond had failed to tackle the real issues facing small businesses such as business rates reform, digital quarterly reporting, unfair changes to the VAT flat rate scheme, the widening of IR35 and tax complexity.
For individuals the Chancellor confirmed that the tax-free personal allowance would rise to £11,500 in April, whilst those on higher earnings will be able to earn up to £45,000 before paying 40% income tax. He further promised to raise the 40% threshold to £50,000 and take more low-earners out of income tax altogether by raising the personal allowance to £12,500 by 2020.
There will be a crackdown on salary sacrifice employee benefit schemes from April, though low emission cars, pensions, childcare and cycle schemes will not be affected. Redundancy payments will attract National Insurance from April 2018.
From April savers will also be able to benefit from an increased ISA allowance of £20,000, as well as a new Lifetime ISA of up to £4,000 a year for any adult under 40 – a precursor for an ISA pension in the future.
Bishop Fleming welcomed the investment in infrastructure and technical training with new T-levels, but expressed disappointment that there was no commitment to reducing business red tape, or the massive tax hike facing landlords from April.
Corporation Tax will reduce from the current 20% to 17% by 2020, which will be welcomed by business owners. However, there will also be further crackdowns on corporate tax avoidance and the use of personal service companies.
Bishop Fleming partner, Andrew Browne, commented: “The promise of extra funds for infrastructure will help the country, though much more will be needed in time.”
Mr Browne continued: “Confirmation that corporate taxes will drop to 17% makes the UK attractive for inward investment, though the disparity between personal and corporate rates will lead to more people setting up companies to take advantage. We also need to make the country match fit for Brexit and that means the government seeing the 20,000 pages of legislation as an obstacle to growth; it needs cutting.”