Spring Budget 2017 - Motor Industry Highlights
The government recommitted to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament.
From April 2017 the personal allowance will rise to £11,500 (£11,000) and the higher rate threshold to £45,000 (£43,000).
Nigel Morris, Employment Tax Director at MHA MacIntyre Hudson said “This is some good news for employees and will help many households manage the impact of inflation and price rises on the high street.”
National Living Wage
The National Living Wage is set to rise from £7.20 to £7.50 in April, for those aged 25 and over.
It was announced in the Autumn Statement in November last year and will boost the pay packets of low income workers.
Nigel Morris, Employment Tax Director at MHA MacIntyre Hudson commented:
“Whilst this is good news for the low paid it does represent a 4.2% pay rise and means a £500 a year pay increase for full-time workers who do a 38 hour week. However, this burden across the whole wage bill would be hard for many employers to sustain”.
Class 4 NIC
The main rate of Class 4 National Insurance contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019 to reduce the gap in rates paid by the self-employed and employees. This will impact self-employed individuals and those self-employed via Limited Liability Partnership arrangements.
Nigel Morris, Employment Tax Director at MHA MacIntyre Hudson expressed concern that these measures whilst a step by the Chancellor to address the £5bn a year difference in NIC between the employed and self-employed, may impact the genuinely self-employed who do not benefit from increased pensions and benefits.
The dividend allowance will be reduced from £5,000 to £2,000 from April 2018, to reduce the tax differential between the self-employed and employed, and those working through a company.
Nathan Sutcliffe, Tax Manager at MHA MacIntyre Hudson was disappointed with this move and commented:
“This will particularly impact small businesses, family owned enterprises and entrepreneurs.”
Private fuel BIK
Nigel Morris, Employment Tax Director at MHA MacIntyre Hudson confirmed that the previously announced increase in the scale charge to £22,600 (£22,200), being a 1.8% increase. However a car with a CO2 increase of 2% to 25% of List Price will receive an increase of £544 (10.7%) and be taxed on £5,650.
“This benefit has been eroded year on year and in many cases employees pay more in tax than the actual cost of private fuel. Business should look urgently at reviewing their fuel policy to ensure there isn’t significant cost leakage in this area”.
Pre-announced reduction to 19% (lowest in G20) in April 2017 and further reductions to 17% by 2020.
Nataan Sutcliffe, Tax Manager at MHA MacIntyre Hudson said “This is good news for business and will help reduce the impact of other measures i.e. business rates as well as reinforcing that the UK is a good place for Corporates to do business”
Glyn Edwards, VAT Director at MHA MacIntyre Hudson expressed disappointment that the Chancellor is pressing ahead with restrictions to the zero-rated relief on cars sold to disabled customers. Glyn commented:
“The relief is already unfairly limited to disabled persons who ‘ordinarily use a wheelchair’, ignoring the mobility difficulties associated with a much wider range of disabilities. Rather than seek to address this unfairness, the Chancellor has reaffirmed a commitment to limit wheelchair users to buying just one VAT-free car every three years except in exceptional circumstances of theft, write-off or satisfying HMRC that a disability has worsened to the extent of requiring a change in vehicle.
Whilst there was a need to tackle abuse of the relief by unscrupulous multiple buyers who were able to resell cars at a profit, this could have been a much more targeted approach, rather than a carte-blanche attack on disabled car drivers.”
Full details about how the restriction will be monitored and the role of dealers in providing information to HMRC are still to be announced.
If you would like further information on the topics discussed in this article, please contact us or speak to your usual MHA MacIntyrte Hudson advisor.