On 8th March, Philip Hammond, Chancellor of the Exchequer, delivered his first and last Spring Budget to Parliament as the government now transitions to a single fiscal event each year, the Autumn Budget.
With Brexit in mind and against a backdrop of economic resilience since the referendum, Hammond reported on ‘an economy that has continued to confound the commentators with robust growth’ and stressed that his Budget ‘puts economic stability first’ and ‘takes forward [the] plan to prepare Britain for a brighter future’ as the government starts negotiations to exit the EU.
- Britain had the second-fasting growing economy in 2016 in the G7, second only to Germany. As a result, the Office for Budget Responsibility (OBR) has improved its 2017 estimate from the Autumn Statement 2016, forecasting that GDP will grow 2% in 2017 (up from 1.4), slow to 1.6% in 2018 (down from 1.7), and bounce back to 1.9 and 2% in 2020 and 2021, respectively.
- Although business uncertainty due to Brexit still weighs on activity and investment, the OBR’s forecast for business investment showed slight improvements since the Autumn Statement, concluding that business investment declined 1.5% in 2016 (up from 2.2). The OBR estimated that business investment will shrink 0.1% in 2017 (up from 0.3), then return to growth with 3.7% in 2018 (down from 4.1), 4.2% in 2019 (down from 5.3) and 3.9% in 2020 (down from 4.1).
Highlights for Businesses and Individuals
- Insurance Premium Tax (IPT) will increase by 2%
As reported in the Autumn Statement 2016, the IPT, a tax on general insurance premiums, will increase from 10 to 12% in June 2017. This increase means the IPT has doubled in fewer than two years, as it was 6% in October 2015.When this latest increase was announced, the Association of British Insurers called it a ‘hammer blow for the hard-pressed’, and the Automobile Association (AA) warned that it will add about £10 per year to the average car insurance premium. The AA cautions that younger drivers and those living in London will bear the biggest burden, potentially making vital cover unaffordable.
- The main rate of National Insurance Contributions (NICs) for the self-employed will increase
Class 2 NICs (paid on profits above £5,965) will be abolished in 2018 and Class 4 NICs (paid on profits between £8,060 and £43,000) will rise from 9 to 10% in April 2018 and to 11% in April 2019.
- Three measures, amounting to £435 million will be used to support businesses affected by the business rates revaluation
Business rates revaluation usually happens every five years, but it is two years behind schedule. The next revaluation takes effect in England on 1st April 2017, meaning areas with rising property prices have seen sharp increases. To help, Hammond pledged three measures:
- Support for small businesses losing Small Business Rate Relief. Those businesses will not pay more than £600 in business rates than they did in 2016-17.
- £300 million to local authorities to provide discretionary relief to hard-hit businesses.
- A £1,000 discount for pubs with a rateable value up to £100,000.
- New consumer protection measures
These include preventing unexpected charges when consumers renew a subscription or end a free trial, making terms and conditions simpler, and fining companies that misled or mistreat customers.
- Corporation tax falls to 19% in April 2017 and 17% in 2020.
To read the Spring Budget in full please visit www.gov.uk
For more information or to discuss your insurance requirements please get in touch.
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Published: 09 March 2017
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