So, the dust has settled on another Budget and it seems our Budget Bingo predictions were a little wide of the mark. We hope you were able to play along and enjoyed the game?
George Osborne had already announced there would be further cuts to public spending (or “efficiency savings” as he puts it), so those and other stealth cuts to the NHS didn’t make it into the Budget headlines. However, the introduction of the “surprise” sugar tax, which was supposed to grab the headlines, has been overshadowed by claims disabled people are being punished to keep Google sweet.
Mr Osborne’s critics are suggesting cuts to disability benefits have been designed to pay for a reduction in corporation tax, thus making it more likely that Google, Amazon and Starbucks will actually pay their UK taxes!
But rather than dwell on speculation, let’s take a look at how the chancellor’s Budget announcements might have an impact on locum staff…
Personal Tax Allowance Increase
Firstly, the personal income tax allowance will increase from £10,600 to £11,000 from 6th April, and will rise again to £11,500 for 2017/18. This means the 40% tax band will rise from £42,385 to £43,000 from 6th April, increasing to £45,000 for 2017/18.
Dividend Tax Change
If you operate as a limited company and pay yourself through dividends, be aware that the 10% notional tax credit has been abolished. A £5,000 tax-free allowance has been introduced, but dividends above £5,000 will now be subject to tax – 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate taxpayers.
Corporation Tax Reduction
The dividend tax change might not be good news, but a change to corporation tax might help soften the blow. Corporation tax will fall from 20% to 19% from April 2017 and should drop to 17% from April 2020.
National Insurance Contributions
Class 2 National Insurance Contributions (NIC) will also be abolished from April 2018, helping millions of self-employed people to keep more of their money, without losing out on contributory benefits like the state pension.
A new Lifetime ISA will be introduced from April 2017 for people under 40. It will allow people to save up to £4,000 a year and get a 25% top up from the government on savings made before their 50th birthday. This can either be used to buy a first home or can be withdrawn from age 60 as a tax-free pension supplement. It’s designed to allow flexibility, freedom and choice for those wishing to save for retirement.
Apparently, it’s “not the right time” for more sweeping pension reform.
Good news for working parents, tax-free childcare will be rolled out in early 2017 for eligible parents of children under 12.
Fuel Duty Frozen
For those who need to travel long distances, you’ll be pleased to hear fuel duty has been frozen for the 6th year in a row. However, insurance premium tax will be increased slightly from 9.5% to 10% from 1st October 2016.
Tax Goes Digital
And finishing on a positive note, self-employed people will be able to adopt pay-as-you-go tax payment patterns from 2018 to help them better manage their cash flow.
If you spotted anything else in the Budget that made you stop and think, please leave a comment below or give us a call. We love a chat.