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A mixed bag?

ON Wednesday 8 March 2017 Philip Hammond delivered the last Spring Budget speech of this Government. So what exactly did the Chancellor say and, more importantly, what did it actually mean?

The first thing to say is despite austerity and the cuts the Government has singularly failed to balance the books since 2010. The Budget predicts that even by 2022, we will still be spending more than we are getting in each year and borrowing the difference. And that with the taxation burden at their highest levels for 30 years.

Remember when Gordon Brown said that he was going to borrow to finance his lavish spending plans and that he would have a Golden Rule that Government borrowing would never exceed 40 per cent of national income? Well despite seven years of austerity and the cuts, the Government’s borrowings are now nearly 90 per cent of national income.

Since the Government seems incapable to reducing expenditure, it can only hope to balance the books by raising more taxes. It’s no surprise therefore that the Spring Budget mainly contained tax raising measures.

Business Tax

Philip Hammond’s Spring Budget brought both good and bad news for businesses.

First, the good news. Small businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD). This is the measure the Government will be introducing in April 2018, under which businesses will be required to file quarterly tax returns in a digital format.

Until the Spring Budget announcement on 8 March, this was going to affect all unincorporated business with an annual turnover above £10,000.

Additionally, unincorporated businesses that have an annual turnover below the VAT registration threshold will be allowed until April 2019 to prepare before MTD becomes mandatory.

The bad news concerns those businesses which are incorporated (limited companies). The tax-free dividend allowance, which enables individuals to receive £5,000 of dividends tax-free will be reduced to £2,000 from April 2018.

Personal Tax

The Chancellor confirmed the rise in the personal allowance from April 2017 to £11,500 and the higher rate income tax threshold to £45,000. There were few surprises in personal tax in the Budget. However, the future looks set for more radical changes.

The government has been concerned for some time now about the taxation of different forms of remuneration and disguised remuneration schemes. In previous Budgets, George Osborne announced a variety of measures to try and tackle some of the worst of the cracks in the system. The current Chancellor is clearly determined to adopt a more strategic approach to this problem and his line of thinking is becoming clearer – he is clearly of the opinion that the self-employed are paying too little tax and NIC as compared to those in employment and it needs to be rebalanced. Watch out for future significant changes in personal tax!

Contact Harris & Co on 01604 660661 or visit the website www.harrisandco.biz

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