How it may affect you.
Chancellor Philip Hammond’s first full budget contained few surprises, and continued to keep a tight rein on public spending. However, as always there are things in it that will affect you, so here is a brief summary of some of the main points of interest.
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
If Britain was a household it would frequently have some very large men knocking on the door asking to see the bill-payer – because Britain has a debt of nearly £1.7 trillion – around £62,000 for every household in the country.
However efforts are being made to address this. 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 total £58.3bn in 2017-18, £40.6bn in 2018-19, £21.4bn in 2019-20 and £20.6bn in 2020-21.
Almost everyone in the UK has a stake in well-funded, decent social care and most would agree that this area urgently needed more funding. So we imagine few would begrudge the extra £2 billion in spending in this area. The spending will help councils to provide high quality social care to more people and help ease pressure on the NHS.
Always of great interest to savers, but there were no new announcements here – simply a confirmation of the new ISA limits effective from 6 April 2017.
The Chancellor also mentioned the Lifetime ISA, of which Metfriendly is currently one of the few providers in the country to offer.
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 Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
You can read more about Metfriendly’s Lifetime ISA here.
ISA: £20,000 pa (prev £15,240 pa)
Junior ISA: £4,128 pa (prev £4,080 pa)
Lifetime ISA: £4,000 pa (new ISA from 6/4/2017)
Some extra money in your pay is on the way with the personal allowance to go up from £11,000 to £11,500 from April 6 2017. This will increase annually until it reaches £12,500. The point at which higher rate tax applies (40%) goes up in April from £43,000 to £45,000.
Those with technically-minded children may welcome the announcement of new ‘T-levels’ for 16 to 19 year old technical students. These will be introduced from autumn 2019. Students will be able to choose from 15 different routes such as construction, digital or agriculture.
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.
Small business owners get some good news at last with £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.
Probably the most contentious part of the budget was the increase in the main rate of National Insurance Contributions (NICs) for the self-employed.
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.
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 hospitality industry is less than happy that the Chancellor has raised duty on beer by 2p per pint and on wine by 9p for a typical bottle– the first increases since 2012.