Key Points From Budget 2017

So what exactly is a damp squib? On old phrase from one of my teachers helps explain - it's a bit like an elephant, difficult to describe but you know one when you see one.

Without doubt Budget (number 1) 2017 was certainly damp. Other than a couple of jokes at the expense of the leader of the opposition and a self-deprecating reference to spreadsheets, there was little to remember, other than, of course, the infamous affair of Class 4 NIC.

A bit of background helps to explain. We already knew that, from 6 April 2018, Class 2 NIC will be abolished and Class 4 NIC reformed to include a new threshold (to be called the Small Profits Limit).

Access to contributory benefits for the self-employed is currently gained through Class 2 NIC. After abolition, those with profits between the Small Profits Limit and Lower Profits Limit will not be liable to pay Class 4 NIC but will be treated as if they had for the purposes of gaining access to contributory benefits. All those with profits at or above the Class 4 Small Profits Limit will gain access to the new State Pension, contributory Employment and Support Allowance and Bereavement Benefit. Those with profits above the Lower Profits Limit will continue to pay Class 4 NIC.

Did anyone really think that Class 4 was not going to go up because of this? However, as we all know, the Chancellor has made a hasty U-turn on increasing the rate of Class 4, so now the self-employed will get a reduction in their NIC bill and an increase in state benefit entitlement. I would suggest watching this space.

What has surprised me is the lack of fuss made about a change which will affect many more clients, namely the reduction in the Dividend Allowance from £5,000 to £2,000 from April 2018. The Government expects that even with the reduction in the Dividend Allowance to £2,000, 80% of 'general investors' will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of £5,000. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers. No headlines on this change though.

Finally, Making Tax Digital got a mention. Businesses, self-employed people and landlords with turnovers under £10,000 will be exempt from these requirements, big deal.

In addition, there will be a one year deferral for unincorporated businesses and unincorporated landlords with turnovers below the VAT threshold. For those that have turnovers in excess of the VAT threshold the commencement date will be from the start of accounting periods which begin after 5 April 2018.

No mention of quarterly reporting, though, which is the big sticking point and appears to serve absolutely no purpose. So much for consultation. We can only hope that common sense will prevail....

Roll on Budget (number 2) 2017 for more joined-up thinking.