The chancellor Phillip Hammond has today presented his Spring Budget to Parliament, we look at the key financial points.
The economic forecast
Growth in the UK economy picked up through 2016. 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.
Cutting borrowing and stabilising the public finances
Britain has a debt of nearly £1.7 trillion – around £62,000 for every household in the country. In 2009-10 the UK borrowed £1 in every £5 that was spent. This year it is set to be £1 in every £15. Borrowing is forecast to be reduced by nearly three quarters by 2016-17.
A three-year NS&I Investment Bond with a market-leading interest rate of 2.2%
The bond will be available for 12 months from April 2017. The government announced the NS&I Investment Bond at Autumn Statement 2016. It will be open to everyone aged 16 and over with the flexibility to save between £100 and £3,000 over three years.
The Lifetime ISA will be available from 6 April this year
The Lifetime ISA will allow younger adults to save up to £4,000 each year and receive a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018
This will reduce the tax difference between the self-employed and those working through a company. Typically, general investors will need over £50,000 worth of stocks and shares outside an ISA to be affected.
The main rate of National Insurance Contributions (NICs) for the self-employed will increase. *
Currently, the self-employed may have to pay both Class 4 and Class 2 NICs:
• 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. Taken together, only a self-employed person with profits over £16,250 will have to pay more as a result of these changes. This better reflects the fact that the differences in contributory benefit entitlement between the self-employed and employees are now small, following the introduction of the new State Pension in April 2016. In the summer, the government will also consider whether there is a case for greater consistency in parental benefits between the employed and self-employed.
Tax-Free Childcare will soon be available to working parents
Tax free childcare will provide up to £2,000 a year in childcare support for each child under 12. Parents will be able to receive up to £4,000 for disabled children up to the age of 17. Parents of younger children will be able to apply for the scheme first, with all eligible parents able to access the scheme by the end of the year.
Working parents in England will also be able to apply for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.
Free transport for children from poorer families who go to selective schools
Children aged 11 to 16 who get free school meals or whose parents are on the Maximum Working Tax Credit will get free transport to their closest selective school, if it is between two and 15 miles away from their home. Children aged 8 to 16 are already entitled to free transport to their closest suitable school, if they live more than three miles away.
Small Businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD)
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory. Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
£435 million to support businesses affected by the business rates relief revaluation
This means no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016-17. Funding for local authorities will allow them to provide £300 million of discretionary relief to provide help to businesses most affected by the revaluation. From April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.
Loans for part time and doctoral students from 2018
The government will provide maintenance loans for people entering part time degrees, and doctoral loans of up to £25,000 to support higher-level study.
New ways to protect consumers
The government will investigate ways to protect consumers from unnecessary costs and inefficiencies, including:
- preventing consumers being charged unexpectedly when a subscription is renewed or a free trial ends
- making terms & conditions simpler and clearer including in digital contracts, like when you sign up to a social network
- fining companies that mislead or mistreat consumers
* The plans to increase National Insurance rates for self-employed people, were subsequently dropped on 15/3/17