IN his final Spring Budget, the Chancellor adopted a Budget of few surprises to provide a "strong stable platform for Brexit".
There was not much detail relating to tax, with attention paid to the funding of adult social care in England and the upcoming reduction in business rates.
Key Tax Announcements
Philip Hammond announced on Budget day a two per cent increase (over two years) in Class 4 National Insurance contributions for the self-employed.
A week later he scrapped this planned increase as he has realised that it breached a manifesto pledge not to increase National Insurance. However, he is still going ahead and abolishing Class 2 National Insurance contributions from April 2018.
The other main announcement for owner managed businesses is the reduction of the dividend allowance. From 6 April 2016 dividend tax rates were increased by 7.5 per cent but to try to ensure that most investors did not pay more tax the allowance was introduced so that the first £5,000 of dividends did not suffer any additional income tax. From 6 April 2018 this allowance has been reduced to £2,000.
Previous Tax Announcements
The personal tax-free allowance is to rise as planned to £11,500 this year and to £12,500 by 2020.
The corporation tax rate of 17 per cent has been confirmed from 1 April 2020 and will be the lowest rate in the G20.
From 6 April 2017 reforms are being introduced which restrict the ability to deduct mortgage interest payments from rental income. Broadly speaking, over the next four years tax relief will be restricted so that by 2020/21, mortgage interest will not be permitted as a deduction of rental income. Instead there will be a basic rate tax deduction which means that higher and additional rate buy-to-let landlords should now be considering how this may affect them.
In addition, transactions in UK land are now becoming more complicated. Where previously the profit on a land transaction would be treated as capital, going forward any profit may be taxed as income depending upon your intentions when you purchased the land, so again advice is key.