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Budget

Budget 2017

Peter Legge Peter Legge

On the 8 March, Chancellor Philip Hammond delivered his last spring budget, in advance of the transition to a single fiscal event each year – an Autumn Budget.  It offered a welcome boost for Northern Ireland with the announcement of £120 million additional funding. Of this amount £90 million was allocated for departmental day to day spending and £30m for capital projects.

On the whole the budget was a low-key affair with the Chancellor deferring many significant tax changes or incentives until the economic impact of Brexit is better understood. The focus was on economic stability and investing for the future to create a vibrant economy, while the UK begins the formal process of exiting the European Union.

The Chancellor’s aim is to create a tax system that is fair and sustainable to support essential public services such as health, education and social care system, whilst also being competitive to support UK economic growth. As part of the government’s economic policy their objective is to support ordinary working families. Next month will see the rise in the national living wage to £7.50.

One of the main measures announced to generate additional government revenue was the modest increase to National Insurance contributions for the self-employed. The Chancellor was concerned about the growing gap between National Insurance contributions paid by those in employment compared to those who are self-employed as he stated both use public services in the same way but are not paying for them in the same way. The Chancellor outlined that those who are self-employed pay significantly less in National Insurance Contributions. The increase to NIC for the self-employed is expected to generate £2bn in extra UK revenue. This comes despite the Conservative manifesto pledge not to raise National Insurance. In Northern Ireland there are around 130,000 people who are self-employed and will be impacted by this change, representing about 15% of the workforce.

Positively, the Chancellor noted that employment levels in Northern Ireland are currently at a record high, with average wages having grown faster than in any other part of the UK since 2010.

The key highlights from the budget include:

  • an increase in Class 4 National Insurance contributions for self-employed from 9% to 10% in April 2018 and to 11% in April 2019;
  • dividend allowance reduced from £5,000 to £2,000 from April 2018;
  • the introduction of quarterly digital tax reporting was delayed to April 2019 for unincorporated business and landlords with turnover below the VAT threshold;
  • reduction to the administrative burden for Research & Development claims; and
  • confirmation the corporation tax rate will be reduced to 17% by 2020.

It is not clear if the measures announced in the spring budget will fully address the imbalances in the Chancellor’s speech or whether further measures can be expected in the future.