Philip Hammond’s (a.k.a. “Spreadsheet Phil”) first budget might not be historically significant, but this year’s red briefcase does hold a few notable changes for parents, savers, business owners and house hunters.
The Chancellor’s announcement will have a significant impact on the self-employed.
A rise in National Insurance (NI) Contributions, alongside a reduction in the Dividend Allowance from £5,000 to £2,000, will be effective from April 2018. Hammond believes this is only likely to effect self-employed people earning over £16,500 and feels it is important to provide fairness in the UK tax system for all. This controversial announcement comes at a time when Brexit trade arrangements and currency fluctuations are unknown and these higher taxes add to business owner’s uncertainty.
The Lifetime ISA was confirmed and might be of interest for those looking to get on the housing ladder.
It will allow individuals aged 18-40 year to save up to £4,000 each year and receive a 25% bonus of £1,000 from the government. The caveat to the government’s generosity is that the bonus is only payable up to age 50 and the funds must be used to purchase a first property; otherwise they cannot be accessed until the plan holder’s 60th birthday as an alternative pension arrangement. Accessing the fund for any other purpose will forfeit the 25% bonus.
There was a tiny chink of light for savers.
Those that have endured a significant period of low interest rates against rising inflation might benefit from the introduction of a new NS&I Bond paying 2.2% over three years. Only time will tell whether this will be enough to keep pace with inflation.
And there was good news for parents.
The introduction of the Tax Free Childcare Scheme allows parents to open an account on Gov.UK website. For every 80p they contribute the government will top up 20p up to a maximum of £10,000 annually. To be eligible parents have to work full or part time, earning at least £115 per week and earning no more than £100k annually.
In summary, Spreadsheet Phil’s announcements were predictably unremarkable. Maybe his softly softly approach will change following the political and public backlash regarding his proposed NI increases. We will see what happens in the first Autumn Budget due later this year.