2017 Spring Budget Summary

Philip Hammond delivered his first and final Spring Budget on Wednesday 8 March 2017.
Our view

"The decision to raise National Insurance Contributions (NICs) for the self-employed did not come as a surprise following last year’s levelling of the State Pension playing field.

"It does not make sense for one group of workers to pay a lower contribution and receive an equal benefit. 

"What will be interesting is whether this increase may be a step towards using NICs to encourage saving for retirement."

Fiona Tait, Pension Specialist

Here’s our summary of the proposed changes with links to Treasury or HM Revenue and Customs documents if you would like more detail.

Income tax

3.4 of HM Treasury Spring Budget 2017

The personal allowance will increase to £11,500 from 6 April 2017 and the point at which the higher rate of Income Tax will apply will increase to £45,000 from 6 April 2017. Although, this will remain at £43,000 for Scottish rate taxpayers.

National Insurance Contributions (NICs)

3.5 of HM Treasury Spring Budget 2017

Class 4 NICs will increase from 9% to 10% on 6 April 2018, and to 11% on 6 April 2019. Class 2 NICs will be abolished from 6 April 2018.

Dividend allowance

3.6 of HM Treasury Spring Budget 2017

The tax-free dividend allowance will be reduced from £5,000 to £2,000 from 6 April 2018.

Business tax

3.11 of HM Treasury Spring Budget 2017

The rate of corporation tax will reduce from 20% to 19% from 1 April 2017. It will further reduce to 17% in 2020.

This will have a marginal impact on the cost for companies providing relevant life cover for employees but the relative cost of the cover remains unchanged. This will also apply to other expenses such as pension contributions.

Pensions

Money purchase annual allowance (MPAA)

Policy paper – reducing the money purchase annual allowance

As expected, the MPAA will reduce from £10,000 to £4,000 from 6 April 2017. The MPAA applies to individuals who have accessed their money purchase pensions using pension flexibility.

Transfers to qualifying recognised overseas pension schemes (QROPS)

Policy paper – qualifying recognised overseas pension schemes: charge on transfers

A transfer request to a QROPS made on or after 9 March 2017 could face a tax charge of 25% on the amount transferred. The tax charge will not be deducted if at least one of the following applies:

  • Both the individual and the pension savings are in the same country after the transfer.
  • The QROPS is in one country in the EEA and the member is resident in another EEA country after the transfer.
  • The QROPS is an occupational scheme provided by the individual’s employer.
  • The QROPS is an overseas public service pension scheme.
  • The QROPS is a pension scheme established by an international organisation.

Review of state pension age

1.56 of HM Treasury Spring Budget 2017

The government is carrying out the first statutory review of state pension ages and expects to publish the results of this review by 7 May 2017.

Master trust tax registration

3.10 of HM Treasury Spring Budget 2017

To align with the Pensions Regulator’s new authorisation and supervision regime, the government will amend the tax registration process for master trust pension schemes. Master trust schemes will be required to demonstrate that they meet 5 key criteria:

  • persons involved in the scheme are fit and proper
  • that the scheme is financially sustainable
  • that the scheme funder meets certain requirements in order to provide assurance about their financial situation
  • systems and processes requirements, relating to the governance and administration of the scheme are sufficient
  • that the scheme has an adequate continuity strategy

ISAs

3.6 and 3.8 of HM Treasury Spring Budget 2017

The lifetime ISA will be available from 6 April 2017 and allows those under 40 to save up to £4,000 each year and receive a bonus of up to £1,000 a year on these contributions. These proceeds can be withdrawn tax-free to put towards a first home or when they turn 60.

In addition, the ISA limit will increase to £20,000 from 6 April 2017.

Published 8 March 2017

The information provided is based on our current understanding of the Spring Budget 2017 and associated documents and may be subject to alteration as a result of changes in legislation or practice.

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Last updated: 08 Mar 2017

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