Budget Hits Self Employed

The biggest headline grabber in the Chancellor's 2017 Budget proved to be the announcement that the main rate of Class 4 National Insurance contributions for the self-employed are to be increased to reduce the gap between the rates paid by the self-employed and PAYE employees.

Contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019. Business owners were also targeted, as the Chancellor announced that the dividend allowance would be reduced to £2,000 from next year, so as to reduce the tax differential between those working through a company and the self-employed or employed.

He also confirmed the previously trailed announcement of a crack-down on companies who use subscription-based charging. This will form part of a wider consumer-protection strategy, designed to tackle companies that mislead or mistreat consumers, which will include looking at how to make terms and conditions clearer, simpler and shorter.

Also confirmed was a set of measures to cushion the impact of business rate rises which have caused an outcry from many businesses facing significant increases.

As is increasingly the case, much of the Budget was no surprise, with a number of measures shared in advance of the formal announcement by Mr Hammond, and many of the imminent tax changes having been announced in previous Budget statements. Those include the increased personal allowance, which will rise by £500 to £11,500 for the 2017-18 tax year, and the increased 40% tax band threshold, which will rise to £45,000.

Other major previously scheduled changes are those affecting landlords with buy-to-let mortgages. From next month, landlords who own rental properties in their own names will no longer be able to deduct all mortgage interest and other finance-related costs from their rental income before calculating their tax liability. It’s a system which has benefitted higher rate tax payers and in future tax relief will be limited, in a phased restructuring which will see mortgage interest relief move from 100% to zero over the next four years, as it is replaced by a 20% tax credit.

For more information on any of the issues raised in this article contact partner and head of the commercial department, Gillian Jones.

 
 
 

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