After a hard year for landlords and second home buyers, many people were hoping that the Chancellor of the Exchequer Philip Hammond might give the housing market a lift today...
But his desire to reduce the UK’s £1.7 trillion national debt, he said, meant that despite lower projected government borrowing this year he wanted “to continue with our plan, undeterred by any short-term fluctuation”.
Consequently, opportunities to lessen the tax burden, and offer first time buyers more incentives to get on the property ladder – although hoped for – did not materialise.
Nevertheless, there were several key changes to taxation that may significantly impact millions of people from all walks of life. Here is our five minute round-up on points concerning the property industry and personal finance.
Personal tax allowance
On the plus side, Hammond announced that the Personal Tax Allowance is to rise from £11,000 to £11,500 while the higher-rate tax threshold – above which earners pay the top rate of tax – will increase to £45,000 next month.
However, the Spring Budget 2017 was not such good news if you are self-employed or the director of a company.
National Insurance contributions
National Insurance payments for those who are self-employed are to rise from 9% to 10% next year, and then to 11% in 2019. Hammond said this was meant to bring their contribution closer to those of employees, who pay NI contributions of 12% on their salaries.
“An employee earning £32,000 will incur between him and his employer £6,170 of National Insurance Contributions,” he said.
“A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.”
Directors of companies will also pay more tax soon. The tax-free allowance that company directors enjoy on dividend payments of £5,000, is to be cut in half to £2,500. This will also affect savers with share portfolios worth more than £50,000.
These measures may cause some issues for landlords, including those who set up companies to reduce the impact of the mortgage interest change made last year.
But the Chancellor did find spare cash to help those with children. On top of the recently-announced introduction of Tax-Free Childcare payments of up to £2,000 towards the care of children up to 12 years of age, Phillip Hammond revealed that those with three and four-year-olds would get their childcare allowance doubled to 30 hours a week.
If any of this affects you, speak to your local agent for their expertise and advice as they will be able to guide you on current market conditions and talk you through the best options for you.