Chancellor Philip Hammond said that this Budget would “provide a strong, stable platform for Brexit”, but Labour responded that it is a Budget of “utter complacency”.
Borrowing is down markedly for this year alone, with many believing that the Chancellor has undershot the target by £16 billion. He said that he still aims to balance the books by the next Parliament.
The Office for Budget Responsibility (OBR) has upgraded growth significantly for this year, but next year will be a slowdown in terms of growth.
The Chancellor was accused of breaking the Conservative manifesto by increasing National Insurance contributions for the self-employed. The increase may raise a small amount of money but, for the lower paid self-employed worker, it is still believed that this move will start a big debate over the difference between taxes paid by those who are self-employed and the higher rate paid by those in full-time employment.
Despite The Chancellor committing an extra £2 billion to social care over the next three years, many believe that this is not nearly enough.
Here are the key points of today’s Budget, for the flexible workforce:
Limited company contractors –
- The planned changes to IR35 operation in the public sector will go ahead from April 2017 as planned. There is a possibility of some relief for ‘expenses’ for affected workers, treated as ‘caught’ who continue to use their limited company – but we don’t have any more detail on this as yet. The legislation is due to be published on 20th March 2017.
- The dividend allowance which currently allows the first £5,000 of taxable dividend income to be received tax free, will be reduced in April 2018 (so next year) from £5,000 to £2,000. If you receive significant dividends in the basic rate band, the likely impact for you, from next year is £225 more dividend tax each year.
Self employed –
- The self employed rate of National Insurance, Class 4, will increase by 1% in April 2018 (again, next year) to 10%, and then again the following April, to 11%.
Recruitment businesses generally –
- The Apprenticeship Levy legislation is being brought in as planned next month.
And here is the detailed list of announcements:
- The main rate of Class 4 National Insurance contributions for the self-employed to increase from 9% to 10% in April 2018 and 11% in April 2019
- The new rate, applying to earnings below £43,000, will raise £145m a year by 2021-22 at an average cost of 60p a week to those affected
- All earnings above £43,000 will be taxed at 2%
- Class 2 National Insurance contributions, also paid by the self-employed, to be scrapped
- No changes to National Insurance paid by the employed and employers or to income tax or VAT
- Personal tax-free allowance to rise as planned to £11,500 this year and to £12,500 by 2020
- £435m for firms affected by increases in business rates, including £300m hardship fund for the worst hit
- Pubs with rateable value of less than £100,000 to get a £1,000 discount on rates they would have paid
- Rate rises for businesses losing existing relief will be capped at £50 a month
- A tax avoidance clampdown totalling £820m to include action to stop businesses converting capital losses into trading losses and introduction of UK VAT on roaming telecoms services outside the EU
- Review of taxation of North Sea oil producers
The state of the economy
- UK second-fastest growing economy in the G7 in 2016
- Growth forecast for 2017 upgraded from 1.4% to 2%
- But GDP downgraded to 1.6%, 1.7%, 1.9% in subsequent years, then 2% in 2021-22
- Annual rate of inflation forecast to rise from 2.3% to 2.4% in 2017-18 before falling to 2.3% and 2.0% in subsequent years
- A further 650,000 people expected to be in employment by 2021
- Annual borrowing £51.7bn in 2016-17, £16.4bn lower than forecast
- Borrowing forecast to total £58.3bn in 2017-18, £40.6bn in 2018-19, £21.4bn in 2019-20 and £20.6bn in 2020-21
- Public sector net borrowing forecast to fall from 3.8% of GDP last year to 2.6% this year, then 2.9%, 1.9%, 1% and 0.9% in subsequent years, reaching 0.7% in 2021-22.
- But borrowing still predicted to be £100bn higher by 2020 than forecast in March 2016
- Debt rose to 86.6% this year, but will fall to 79.8% in 2021-22
Alcohol, tobacco, gambling and fuel
- No increases in alcohol or tobacco duties on top of those previously announced
- A new minimum excise duty on cigarettes based on a packet price of £7.35
- Tobacco will rise by 2% above Retail Price Index (RPI) inflation, with a packet of 20 cigarettes costing 35p more
- Duty on beer, cider, wine and spirits will increase in line with RPI inflation
- This will equate to 2p on a pint of beer, 1p on a pint of cider, 36p on a bottle of whisky and 32p on a bottle of gin
- Vehicle excise duty rates for hauliers and the HGV Road User Levy frozen for another year
Pensions and savings
- Reduction in tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
- The measure will come into force in April 2018, raising £2.63bn by 2021-2022
- Measures to tackle abuse of overseas pension schemes
- £300m to support 1,000 new PhD places and fellowships in STEM (science, technology, engineering and maths) subjects
- Free school transport extended to all children on free school meals who attend a selective school
- Upgrade fund of £216m for existing schools
- Funding for 110 new free schools and grammar schools
- New T-Levels to be introduced to give parity of esteem for technical education
- Number of hours of training for technical students aged 16 to 19 increased by more than 50%, including a high-quality, three-month work placement
Health and social care
- £100m to place more GPs in accident and emergency departments for next winter
- Additional £325m to allow the first NHS Sustainability and Transformation Plans to proceed
- An extra £2bn for social care over next three years, with £1bn available in the next year
- Long-term funding options to be considered but so-called ‘death tax’ on estates ruled out
- Most sugary soft drinks to be taxed at 24p per litre as part of plans to reduce childhood obesity
- Transport spending of £90m for the north of England and £23m for the Midlands to address pinch points on roads
- £690 million competition fund for English councils to tackle urban congestion.
- £270m for new technologies such as robots and driverless vehicles
- £16m for 5G mobile technology and £200m for local broadband networks
- £250m in funding for Scottish Government, £200 for Welsh Government and £120m for Northern Ireland Executive
- New funding totalling £20m to support the campaign against violence against women and girls
- A further £5m committed to project to celebrate the centenary of women first getting the vote, and to educate young people about its significance
Funding of £5m to support people returning to work after a career break