Spring Budget 2017
On Wednesday 8th March 2017, the Chancellor delivered his final Spring Budget. In truth, it was a very compact budget that lead to very little change to general tax law.
The main headlines from a tax perspective were the increase in National Insurance for the self-employed and the reduction of the dividend exemption from £5,000 to £2,000. These are the main points the headline writers have decided to run with but, in reality, they are not the major stories they are being billed as.
The increase in Class 4 National Insurance is counter balanced by the abolition of Class 2 NIC and the fact that the self-employed will now be entitled to increased state pensions. Whilst the timing is unwelcome, the change is probably fair on the whole.
As for the dividend tax change, well, let’s face it, we were all surprised by the £5k exemption when it was introduced. It seemed like a tax cut for people with large share portfolios, which appeared a little unfair. The small business owner must counter balance this reduction against the imminent reduction of Corporation Tax to 17%. On the whole, small business owners are unlikely to be any worse off.
In isolation the above changes aren’t unreasonable. However, the timing seems insensitive. This coupled with the fact that the larger mutlinationals seem to continue to avoid paying their fair share of tax exlains why so many self-employed people are angered by this. It’s time for the Government to seriously level the playing field for smaller business so they have some chance of competing against their larger rivals. Small business, not large business should be the government’s main priority.
The pleasant suprise in the budget was the deferral of making tax digital (MTD) until April 2019 for small businesses under the VAT threshold. This will provide welcome breathing space to many businesses which, put simply, are not ready for this change.
Richard Ellis (B.A., F.C.A)
Read the full Budget Guide here: 2017 Spring Budget