On Wednesday 23 November the Chancellor, Phillip Hammond, presented his first, and last, Autumn Statement along with the spending review.
There were not any significant surprises but he affirmed the objectives to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this parliament.
The personal tax free allowance is currently £11,000 and this will rise to £11,500 for the 2017/18 tax year. Currently the basic rate of tax is 20% on taxable income of £32,000 which means that the threshold for 40% tax applies on income from £43,000.
Legislation has already been enacted to increase the basic rate band to £33,500 and the higher rate threshold increasing to £45,000 for the 2017/18 tax year. The additional rate of tax of 45% was payable on taxable income above £105,000.
Dividends received by an individual are subject to special tax rates. The first £5,000 of dividend income is charged to tax at 0%. Dividends received above this allowance are taxed at the following rates:-
- 7.5% for basic rate tax payers
- 32.5% for higher rate tax payers
- 38.1% for additional rate tax payers
For those operating through limited companies the corporation tax rates have already been enacted for periods up to 31 March 2021. The main rate of corporation tax is currently 20%. The rate will then be reduced as follows:-
- 19% for the financial years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
- 17% for the financial year beginning on 1 April 2020.
Class 2 National Insurance contributions will be abolished from April 2018 and following this, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 National Insurance contributions. Self-employed people with profits below the small profit limit (£5,965 for 2016/17) will be able to access contributory employment support allowance through Class 3 National Insurance contributions.
Following the recommendations of the Independent Low Pay Commission, the government will increase the National Living Wage from £7.20 to £7.50 from April 2017. There are differing rates for those aged 24 and below which can be obtained from our website.
On 15 August 2016 HMRC published six consultation documents on making tax digital. Two key changes are now proposed:-
From April 2018 self-employed tax payers and landlords will be required to keep their business records digitally and submit information to HMRC on a quarterly basis and submit an end of year declaration within nine months of the end of an accounting period.
HMRC will make better use of the information which they currently receive from third parties and will also require more up to date information from some third parties such as details of bank interest. Employees and employers will see the updating of PAYE codes more regularly as HMRC use the data received from the third parties.If you have any questions please do contact us.