The Chancellor of the Exchequer, Phillip Hammond, has announced his first budget, saying he is "building the foundations of a stronger, fairer, more global Britain". This is how your life will be affected.
- 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. In the spring budget, Philip Hammond initially announced that Class 4 NICs would rise to 10% in April 2018 and to 11% in April 2019. However, on March 15, the chancellor abandoned plans to raise national insurance for the self-employed by 2 percent.
- Personal tax-free allowance to rise as planned to £11,500 this year and to £12,500 by 2020
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
From 1 April 2017 the VAT registration threshold will increase to £85,000 from £83,000 and the deregistration threshold will rise from £81,000 to £83,000
Making Tax Digital (MTD)
The Chancellor has delayed the introduction of Making Tax Digital for sole traders, landlords and the self employed operating under the new £85,000 VAT threshold. The Chancellor's announcement means that sole traders, the self employed and buy-to-let landlords with income of less than the current £83,000 VAT threshold will not have to start quarterly reporting until 2019, a one-year deferral from the planned April 2018 introduction date originally set out in the recent consultation feedback documents issued by HMRC at the end of January.
Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
Evaluation of Employment Practices
An ongoing review of employment practices has been conducted by Matthew Taylor. The chancellor has suggested that this will discuss the tax regime for flexible workers and the report is expected over the summer.
Should you have any questions about how those changes will affect you, please feel free to get in touch with us.