With the 2017 Spring Budget being announced yesterday, the TBOS office were riveted to the broadcast, waiting to find out what changes would be made. Our Director (Stewart) and our Finance Manager (Oliver) sat down to look over the points which have been raised and look at how they’ll affect our clients:
- Limit at which people start paying tax to be raised to £11,500 from 6th April 2017 and increasing to £12,500 by 2020
- Higher rate tax threshold increased from £43,000 to £45,000 from 6th April 2017
Our Comment – An increase in the personal tax allowance means that more low-paid workers will not be taxed and it should mean more money in your pocket each month. A £500 increase to the basic rate threshold translates to an extra £100 in a taxpayer’s pocket, assuming their wages don’t change. As the higher rate threshold has also increased there’ll be more benefits for higher earners.
Changes to Taxation for Directors
- From 6th April 2018, the tax free allowance on dividends will decrease from £5,000 to £2,000
Our Comment – Directors will now incur a higher level of tax – that £3,000 reduction in tax free allowance will now be taxed at 7.5%. If you were currently taking dividends of above £5,000 you’ll see an extra £225 of income tax, assuming dividend tax rates stay as they are.
Help for Business
- Corporation Tax to be cut by 1% to 19% from 1st April 2017 and will continue to reduce the Corporation Tax rate to 17% by 1st April 2020.
- From 1st April 2017 Corporation Tax losses can be offset against companies within a group structure
- Employment Allowances will continue at £3,000 from 6th April 2017
- From 1st April 2017, the small business rate relief will double from 50% to 100% with businesses with a ratable value of £12,000 or less not paying any rates
- Increases to business rates for any business coming off the small business rates relief will be capped at £50 increase per month
- A £300m fund will be made available to local government to assist business’s struggling to manage their rate increases. These funds will be used entirely at the local bodies’ discretion
Our Comment – Reduced Corporation Tax makes the UK more attractive for overseas companies to set up here. Being able to offset Corporation Tax losses within a group will help those who may otherwise have become trapped or unusable, and capping rates for small businesses should keep business rates from becoming too much of a burden.
Changes to Contract Workers Payments
- From 6th April 2017, contract and temporary workers in the public sector will no longer be able to fall outside of IR35 and will automatically have to be paid PAYE and declared through RTI
Our Comment – The T&S allowance discussion has been going on for some time, but the impact on contract workers and umbrella companies remains to be seen. General consensus is that most contractors will lose their expense allowances and receive a lower take-home pay. Upcoming public sector changes will move more workers to the private sector, although this may be next on the Chancellor’s list.
- From 1st April 2017, the National Living Wage of £7.50 for over 25s will be introduced
Our Comment – We recommend a review of all current internal staff and PAYE contractors to ensure everyone is earning over the equivalent of £7.50 per hour to remain compliant.
Transport & Infrastructure
- £200m is going to be invested in local broadband networks, £300m to be invested in biotech, robotics and driverless cars and £16m for a 5G technology hub
- £90m to be provided to the North and £23m for the Midlands for roads improvements
- £690m to be provided to local government in an effort to combat urban congestion
- Funding to be provided for 110 new ‘free schools’ in addition to £216m to be provided over 3 years to existing schools to rebuild and repair their facilities
- Investment of £2bn over 3 years to be provided to adult social care in the UK
- £100m being made available by next winter to ensure that triage departments are fully staffed in A&E
Our Comment – Great news for the telecoms industry with that 5G hub and broadband network investments, and agencies working in these sectors should prepare to take advantage. A major biotech and robotics investment could create new areas for recruitment agencies, and with 110 new free schools any education recruiter has a big opportunity ahead of them. There looks likely to be an increase in the contractor market in the healthcare sector, too, particularly in social care and GPs for triage departments.
Energy & the Environment
- The government plans to maximise the exploitation of North Sea oil
Our Comment – With little information to go on, there appear to be few new opportunities in this industry arising from the Budget.
- Lifetime ISA will be launched from 6th April 2017 for any person under the age of 40. Savings up to £4,000 per year will receive a 25% top up for each pound invested and can be taken either at retirement or when the first home is purchased (up to property values of £450,000)
Our Comment – This looks like fantastic news for the construction industry which is likely to provide more opportunities to construction focused recruiters.
Fuel, Tobacco, Alcohol… And Sugar
- Fuel Duty has been frozen
- Beer, Cider, Wine and Spirits prices will increase by RPI inflation
- Tobacco duty now will have the ‘minimum excise tax’ on cigarette packs, which will be £268.63 per 1,000 cigarettes based on a retail price of £7.35 for a pack of 20. The minimum duty will be £5.37
- Sugar levy on manufacturers of soft drinks with sugar content above 5g per 100ml will be set at 18p per litre and those with 8g or more will be 24p per litre
Our Comment – With the exception of fuel, all duties will be raised this year. Fuel prices may or may not still increase but tobacco, alcohol, and sugar based soft drinks are not so lucky.
For a deeper insight into how any of these finance/legislation changes might affect your agency, please don’t hesitate to contact TBOS. We’ll be happy to talk you through them.