It’s springtime for the Chancellor and HM Treasury, which brings with it the Budget for 2017. We look at what it means for your finances and ask whether you’ll be better or worse off.
Chancellor Phillip Hammond opened with a joke about how this would be his last Spring Budget, but only because he is rearranging it with the Autumn Statement, meaning there will be Autumn Budgets in the future.
The joke was perhaps less dramatic than when he made it in his 2016 Autumn Statement (as it no longer sounds like he’s going to be sacked), but it still earned him a laugh from the house of commons.
The budget mainly focused on high level spending and the need to improve Britain’s competitiveness, with Hammond saying the UK’s “debt is too high, productivity is too low and too many families are still feeling the squeeze”, but there were a few announcements that will immediately affect people’s pockets.
More tax for the self employed and company directors
Chancellor Hammond set out his plans to create a fairer tax system, highlighting the need to create consistency between the benefits and taxes paid by salaried employees and those who work for themselves.
To this end, self employed people currently paying Class 4 National Insurance (9% on profits between £8,060 and £43,000) will see their contributions rise to 10% in April 2018, and again to 11% in April 2019.
But to soften the blow on the self employed, Class 2 National Insurance Contributions (£2.80 a week paid if annual profits are over £5,965) will be abolished from 2018.
The Treasury states: “only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.”
The Chancellor also had his sights set on company directors (in essence major shareholders) with the intention to “reduce the tax difference between the self-employed and those working through a company”, with tax-free dividend allowance being reduced from £5,000 to £2,000 from April 2018.
The government estimates, you would need at least £50,000 worth of stocks and shares outside of an ISA to be affected.
More investment in 5G and broadband
The treasury has set aside £16 million to invest in a national “5G Innovation Network” for trialing new 5G technology.
There was also a plan to inject £200 million to build “fast and reliable full-fibre broadband networks”.
- Read more – What is 5G and when will it launch in the UK?
- Read more – Where will the £200 million investment go?
Increased taxes on international roaming
The Budget also announced plans to add a 20% VAT charge to mobile phone roaming costs outside the EU, starting from 1 August 2017.
So if you’re travelling to a country that isn’t part of the EU, such as the USA, Australia or Dubai after the charges have been applied, your bill could be as much as 20% higher.
New market-leading investment bond and Lifetime ISA to launch
A three-year NS&I Investment Bond with a market-leading interest rate of 2.2% will be available for 12 months from April 2017. It will be open to everyone aged 16, requires at least a £100 to deposit, but is capped at maximum of £3,000.
The Lifetime ISA, is also launching in April will allow those aged 18-40 to receive £1 for every £4 deposited (up to an annual maximum of £1,000 bonus for £4,000 of deposits), this money withdrawn tax-free to put towards a first home or once a saver turns 60.
The NS&I Investment Bond was announced in Hammond’s “first and last” Autumn Statement in 2016 and former Chancellor George Osborne created the Lifetime ISA in his (actual) last ever budget, but Hammond took the opportunity to highlight them again, as they will be launching soon.
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New regulations to protect consumers
Bringing up another past announcement, Hammond highlighted the “Green Paper” on consumer rights, which is investigating ways to protect consumers from “unnecessary costs and inefficiencies”.
The paper will cover:
- Preventing consumers being charged unexpectedly when a subscription is renewed or a free trial ends
- Making terms & conditions simpler and clearer including in digital contracts, like when you sign up to a social network
- New fines for companies that mislead or mistreat consumers
Government loans for part-time and PhD students
From 2018 the government will provide maintenance loans for people entering part-time degrees, and doctoral loans of up to £25,000 to support higher-level study.
There was also £90 million set aside to provide 1,000 new PhD places, but mainly in science, technology, engineering and maths, which were seen as key areas to invest in to improve the UK’s competitiveness.
Tax-Free childcare to be “available soon” for working parents
The government’s Tax-Free Childcare initiative will provide up to £2,000 a year in childcare support for each child under 12. It works by the government paying 20 pence for every 80 pence a parent pays towards childcare.
There will also be an additional 15 hours of free childcare for three and four year olds available to households where both parents work, bringing the total to 30 hours a week.
This was another initiative that Hammond has already been announced, but Hammond raised it again in this budget, emphasising commitment and that it will be “available soon”, but no launch dates were mentioned beyond “early 2017”.
Have your say
- What the 2016 Autumn statement means for your finances – While this statement was focused on wider plans to shore up Britain’s “economic resilience” and improving productivity, there were a few things that will directly affect peoples’ pockets.
- What does the base rate cut mean for your finances? The Bank of England cut the base rate of interest to 0.25% in August 2016, this new all-time low could spell cheaper mortgage payments but worse returns on savings
- Could “Trumpflation” put the cost of your mortgage up? There is a lot gossip and speculation around what U.S. president-elect Donald Trump will do to the world economy, but could he actually drive up the cost of mortgages in the UK?