A few weeks ago, on the 8rd March 2017, the Chancellor of the Exchequer Philip Hammond presented his Spring Statement to Parliament. Key points on what we should expect are highlighted in this article.
Growth in the UK economy picked up through 2016 and employment has reached a record high of 31.8 million people. The Office for Budget Responsibility (OBR) now forecasts that the UK economy will grow by 2% in 2017. The OBR also forecast that the economy will grow at a slightly slower rate in 2018, before picking up to 2% in 2021.
What does it mean to individuals and businesses?
- The national living wage and the national minimum wage will be increased.
The national living wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. That means over £1,400 a year more for a full-time worker previously on the National Minimum Wage. The national minimum wage will also increase:
For Apprentices – from £3.40 per hour to £ 3.50 per hour
For 16-17 year olds – from £4.00 per hour to £4.05 per hour
For 18-20 year olds – from £5.55 per hour to £5.60 per hour
For 21-24 year olds – from £6.95 per hour to £7.05 per hour
- Personal allowance will be increased
The amount of income you can earn without paying income tax is increased to £11,500 in 2017/18 and to £12,500 by 2020. Higher rate threshold will increase from £43,000 this year to £45,000 in 2017/18 and to £50,000 by 2020/21.
- Corporation Tax will be reduced further
There will be a further reduction in Corporation Tax, which is currently charged on profits at 20%. It was announced previously that from 1st April 2017 the corporation tax would be reduced to 19% and from 1st April 2020 the rate will be reduced again to 17%. This measure will benefit over a million companies, large and small. It will also ensure the UK has the lowest corporation tax rate in the G20.
- National Insurance Contributions will be changed
Currently, the self-employed may have to pay both Class 4 and Class 2 NICs. The current rates are:
Class 4 NICs at 9% are paid on profits between £8,060 and £43,000
Class 2 NICs are paid on profits of £5,965 or more
From 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.
- Tax-free dividend allowance will be reduced
The government has announced it is going to cut the dividend tax allowance from £5,000 to £2,000, with the reduction taking effect from April 2018. The government said the decision takes into account further increases to the tax-free personal allowance and the rising ISA allowance, which will increase to £20,000 from April 2017.
- National saving and Investments (NS&I)
To support savers, NS&I will offer a new three-year Investment Bond with an indicative rate of 2.2% from spring 2017. The bond will offer the flexibility to put away between £100 and £3,000 and be available to those aged 16 or over.
- Individual saving account (ISA)
The Chancellor has announced that the annual limit on investments into all ISAs is to increase from £15,240 (2016/17) to £20,000 from 6 April 2017
