This Budget didn’t deliver many surprises in terms of the personal tax impact for individuals, which is to be expected given the many other issues the Chancellor is dealing with at present!
As usual, there were changes to the personal allowances and basic rate bands, which always go some way to having a positive impact on people’s basic perception of the budget, as well as their wallets. The personal allowance will be £11,850 from 6 April 2018, which is an increase of £350 of tax free allowance for every individual. The amount of income, which would be taxed at the basic rates of tax, has also increased from £45,000 to £46,350.
The National Insurance rate, on the other hand, remained untouched. I am sure that the current uncertainty, combined with the backlash that the Chancellor received by proposing an increase of 1%, played a factor in this.
It was an open secret that HMRC were going to delay the abolition of Class 2 National insurance rates, and it was great to see this finally confirmed in the Budget. However, the impact for this will be low with the rate for Class 2 at £2.80 per week at present.
The National Minimum Wage/National Living Wage will be increased to £7.38 per hour from April 2018. It means a rise of £600 per year for individuals who work full time. But while the government has painted this as positive, many small businesses will no doubt see it as more burden on the bottom line.
Universal Tax Credits
The newly introduced Universal Tax Credits have been amended to appear to introduce more flexibility and use for people who are beginning to make a claim. There is no longer a seven-day waiting period to making a claim, any advances can now be made within five days of the claim, and the repayment period for these have been extended from 6 months to 12 months. This gives more help and support for families who find themselves in the situation of needing to make a claim.
The only area of concern for me is whether the systems HMRC have in place are sufficient enough to allow the new process to operate as efficiently as required and that we don’t end up with same issues we had with Tax Credits, but under a different name.
The introduction of relief from Stamp Duty Land Tax (SDLT) for first-time buyers was a welcome change and a great headline for the government to put forward. But as always, the devil is in the detail. My particular concern is the definition of a first-time buyer and how this relates if a couple is buying a property together.
The new measure suggests that on properties up to £300,000, on which the relief applies, a SDLT saving of £5,000 will be realised. While on paper, this is a useful saving for first-time buyers, I am not sure whether this will have the desired effect of encouraging people to purchase property as the bigger hurdle for first-time buyers is the large deposit needed due to the current level of property prices.
To encourage the uptake in electric cars, there will not be a Benefit in Kind charge for employers who have provided a charging point at their place of work for employee use. This is a fantastic move. However, it will not have a significant impact on many individuals until electric cars become the norm!
Additional points to look out for
As mentioned earlier, the devil is the detail. Having looked through the detail within the Budget publication, there have been some other changes not announced as part of the Chancellor’s speech.
One of these relates to the marriage allowance available, where unused allowance from one spouse to another can be transferred to a basic rate taxpayer. They have announced that where one spouse has passed away, the claim can be made and backdated up to four years, if appropriate. This could lead to a potential tax saving in 2017/2018 of £230.
Finally, HMRC are also looking to review various items over the next 12 months, which include the taxation of trusts and the Rent a Room Relief.