On 22nd November, the Chancellor of the Great Britain Philip Hammond presented the Autumn Budget 2017.
The Budget introduces several measures aiming at boosting the Country’s economic growth, as well as changes to Personal and Business taxes.
The information below summarises the key changes introduced by the Autumn Budget 2017 across personal tax, business tax and other major matters.
Tax bands and rates
The Budget includes an increase of the Personal Tax allowance to £11,850 from £11,500 and a change to the income tax bands subject to 20% and 40% rates.
|Tax rate||2017 / 2018||2018 / 2019|
|Personal Tax Allowance||£11,500||£11,850|
|20%||£0 - £33,500||£0 - £34,500|
|40%||£33,501 - £150,000||£34,501 - £150,000|
|45%||Over £150,000||Over £150,000|
There will continue to be a £1 reduction in the value of the personal tax allowance for every £2 of net income above £100,000. This brings the income threshold to receive no personal tax allowance at £123,700 from the current £123,000.
The Dividend Allowance will be reduced from £5,000 to £2,000 from 6th April 2018.
Individual Saving Account (ISAs)
Increase of the Individual Saving Account (ISA) limit to £20,000 from £15,240 across all types of ISAs available.
Change to the recently introduced ‘Universal Credit’, a state benefit in support of low-income or out-of-work people intended to replace existing measures such as house benefit, tax credit or income support.
The Budget accelerates access to monetary benefit and provides eligible claimants one month’s worth of financial support within five days of their application via an interest-free credit that can be repaid over 12 months.
The measures presented by the Chancellor air at boosting growth investments in Venture Capital Schemes (the EIS, Seed Enterprise Investment Scheme and VCTs) and target companies where there is a real risk to the capital invested and exclude companies’ arrangements intended to preserve their capital.
Details of the relief measures and their rollout timeline will be published in the Finance Bill.
Making Tax Digital for VAT
From April 2019, all VAT-registered businesses with turnover above the VAT threshold will maintain digital tax records and report digitally to the HMRC.
The ‘Making Tax Digital for VAT’ program will not involve using and maintaining digital invoices or receipts but rather requires businesses to provide digital records of supplies made and received.
Maintaining digital records of supplies will need to be done via third-party software which HMRC will not provide.
Corporation tax rates
The Budget brings a reduction of the Corporation tax rates to be rolled out in the fiscal year 2019/2020
|2017 / 2018||2018 / 2019||2019 / 2020|
|Corporation tax rate||19%||19%||17%|
National Living Wage
The Chancellor has confirmed a rise in the National Living Wage to £7.83 per hour from April next year. This is the hourly rate paid to over 25-year-old workers and it currently amounts to £7.50.
National Insurance contributions – Class 2 and 4 NICs
The Budget includes a 1-Year deferral to the abolishment of the Class 2 National Insurance Contributions (NICs), introduced with the 2016 Budget and initially planned for April 2018.
The Government is still committed to abolish the Class 2 NICs, but the deferral will allow extra time to all parties interested with this change.
The Chancellor announced a proposal to increase the main rate of Class 4 NICs, however this statement was subsequently rectified and no change to this rate will be made.
Meanwhile, the threshold of the Lower Profit Limit and the Upper Profits limit will rise from April 2018 as follow:
|2017 / 2018||2018 / 2019|
|Lower Profits Limit||£8,164||£8,424|
|Upper Profits Limit||£45,000||£46,350|
Research and Development expenditure
The rate of tax credit on R&D expenditure has been increased to 12% from 11% on all expenditures incurred on or after 1st January 2018.
Capital gains indexation allowance
The Budget reviews the indexation methodology to calculate capital gains allowance. This will now be based on the Retail Price Index (RPI) for December 2017 for all asset disposals conducted on or after 1st January 2018, irrespective of the actual time of disposal.
Other major matters
The evaluation system of Business Rates has been revisited via two major changes:
- Bringing forward the use of the Consumer Price Index (CPI) instead of the Retail Price Index (RPI) as inflation metric to 1st January 2018*; and
- Neutralising the so-called “staircase tax” via a backdated legislation that will refund tax amounts paid by businesses since April 2015 in England and April 2010 in Wales. Upon requests by the impacted businesses, local authorities will be required to refund the tax amounts paid and subsequently ask for compensation from the Government.
* The change was initially planned for 2020 and it is expected to reduce the burden of business rates across Scotland, Northern Ireland and Wales as CPI tends to increase at lower pace than RPI.
Stamp Duty Land Tax (SDLT)
One of the most significant measures expected to impact the UK housing market is the relief to the Stamp Duty Land Tax (SDLT) rate for first time buyers.
This change will be of immediate implementation and therefore will be live from 22ndNovember. The economic impact of the change in the amount of SDLT will depend on the value of the property as summarised below:
- For homes valued up to £300,000 the SDLT will be completely abolished for first time buyers;
- For homes valued between £300,000 and £500,000 there will be no SDLT payable on the first £300,000 but there will continue to be a 5% tax on the residual amount; and
- For homes valued more than £500,000 the SDLT will remain as before without any relief.
For more information about the Autumn Budget 2017 and the opportunities for individuals and SMEs to invest in the UK contact: