In many ways this was an historic event – the first Budget since the EU referendum and the last spring Budget. The general expectation was of a steady-as-she-goes Budget, with any key policy announcements left until the autumn. Although the economic picture appears stronger than expected, Mr Hammond was keen to leave plenty in the tank to face the challenges of Brexit.
There is a hit for shareholders receiving dividends – the tax-free dividend allowance will fall from £5,000 to £2,000 from April 2018. Painful, but it could have been worse. The self-employed also take some pain, with an increase in National Insurance from nine per cent to 11 per cent over two years from April 2018.
At the same time there is some welcome relief from several of the more extreme effects of the recent business rates revaluations, with transitional relief for companies moving out of small business rates relief and a discretionary fund for local authorities to relieve the worst-affected firms. While welcome, this may however result in a complex and drawn-out process to obtain relief.
The Chancellor gave some momentary hope there might be a broadening of the R&D tax credit relief system, but instead he said it was already world-class so the improvements will simply be to lower the administrative burden of making a claim. A good thing but hardly earth-shattering.
Paul Brown - HURST Tax Partner
Mr Hammond did emphasise the international competitiveness of the UK tax system, but stopped short of any dramatic changes. There will also be the usual raft of new anti-avoidance rules.
On the spending side, the Midlands Engine will get a new strategy but little was said about the Northern Powerhouse. There will be additional funding for northern roads and a ‘competition’ for local authorities to access money to relieve congestion. Investment in broadband and 5G infrastructure will hopefully have a positive impact on productivity, but much of the planned infrastructure spending will only really kick in after 2020.
As widely expected, there will be additional funding for technical education for school-leavers, including three-month work placements for everyone aged 16-19 in technical education. The introduction of T-levels to raise the status of technical education also seems like a sensible move, and additional funding for new PhD places is a positive. Overall, anything that increases the availability of work-ready entrants to the labour market is a good thing as we face the prospect of skills shortages post-Brexit. However, inevitably there will to be something of a lag before we see the benefits flow through.
It was a relatively short Budget speech with few surprises, spiced with some welcome, if relatively low-level, positive changes. It is hard to see how the measures announced will do much to enhance the UK as a place to start and build businesses in the way the Chancellor aspires. One suspects the first autumn Budget may contain a lot more of interest as Mr Hammond reacts to the progress of Brexit negotiations.
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