March 2017 Budget

March 2017 Budget

Below is a summary of the main points announced by the Chancellor of the Exchequer in the March 2017 Budget.

Please note that every care has been taken in preparing this summary but no responsibility can be accepted for loss occasioned to any person acting or refraining from acting as a result of the material herein.

Tax Rates

Income Tax

The following income tax rates will apply for the 2017/18 years:

  • The basic personal tax-free allowance is £11,500 but this will be restricted for income in excess of £100,000.
  • The first £33,500 of taxable income is to be taxed at 20% – or 7.5% for dividends after the first £5,000.
  • The next £116,500 is taxable at 40% – or 32.5% for dividends.
  • The balance over £150,000 is taxable at 45% (or 38.1% for dividends).

From April 2017, there will be no need to pay tax on up to £1,000 of income from occasional jobs and the first £1,000 of property income. Where tax allowances cover income fully, there will be no need to declare the income.

People with income exceeding £1,000 can choose to either deduct the allowance or actual expenses to calculate the taxable amount.

Dividends

The 0% dividend allowance will be reduced from £5,000 to £2,000 from April 2018.

Trusts

The tax rate applicable to trusts income (excluding dividends) is 45%.

National Minimum Wage

From April 2017, the national living wage will increase for workers aged 25 and older to £7.50 per hour. The minimum wage will continue to apply to workers aged 24 and under.

Transferable Tax Allowances For Married Couples

A spouse or civil partner who is not liable to income tax above the basic rate can transfer up to £1,150 of their personal allowance to their spouse/civil partner provided the recipient of the transfer is not liable to higher rate tax. This is applicable for the 2017/18 tax year.

Individual Savings Accounts (ISAs)

The ISA subscription limit will be increased to £20,000 from April 2017.

Lifetime Isa

A new Lifetime ISA will also be introduced from April 2017 which will be available to those aged between 18 and 40. It will allow them to save up to £4,000 per year for their first home or for retirement.

National Insurance

2017/18

Class 1 NIC – Employee & Employer rates & thresholds are per week unless stated:

Lower Earnings Limit – £113.00

  • Upper Earnings Limit (UEL) for employees’ primary Class 1 NICs – £866.00
  • Primary Threshold – £157.00
  • Secondary Threshold – £157.00
  • Upper Secondary Threshold for U21’s – £866.00

Employee’s (primary) Class 1 contribution rates

  • Weekly earnings above £157.01 to £866.00 – 12%
  • Weekly earnings above £866.00 – 2%

Employer’s (secondary) Class 1 contribution rates

  • Weekly earnings above £157.00 – 13.8%

Class 2 NIC

  • Self-employed NIC per week – £2.85
  • Small profits threshold – £6,025

Class 2 NIC will be abolished from April 2018 and, at the same time, the main rate of Class 4 NIC will increase by 1% to 10%.  A further increase to 11% will follow from April 2019 in order to align more closely with the rates paid by employees.

Class 4 NIC

  • Annual profits below lower profits limit of £8,164 – Nil
  • Annual profits above £8,164 but below £45,000 – 9%
  • Annual profits above upper profits limit of £45,000 – 2%

Employment Allowance

The Employment Allowance will remain at £3,000 in 2017/18.

Capital Gains Tax (CGT)

The annual exemption for 2017/18 will increase to £11,300.

The rates of Capital Gains Tax will remain at 10% for gains that fall within the basic rate band and 20% for gains that fall within the higher rate band.

The rates of Capital Gains Tax for chargeable gains on the disposal of residential property (that does not qualify for private residence relief) and carried interest will remain at 18% for gains that fall within the basic rate band and 28% for gains that fall within the higher rate band.

Inheritance Tax

The nil rate band will remain at £325,000 for 2017/18.

However, from 6 April 2017, you can also benefit from an additional nil rate band if you leave your main home to your children or grandchildren.

For 2017/18 this additional band will be £100,000 and will rise by £25,000 per year over the next three tax years.

The tax payable on the excess of the chargeable estate over the above threshold remains at the rate of 40%. A reduced rate of inheritance tax of 36% is available where 10% or more of the net value of the estate is left to a qualifying charity.

Corporation Tax

The Chancellor confirmed that corporation tax rates for UK companies will fall from the current 20% to 19% from 1 April 2017. The rate of corporation tax will be reduced further to 17% by 2020.