Spring Budget 2017: Tax Issues

Posted at 4:53 pm on March 8, 2017 by Taxxa LLP

Spring Budget 2017: Tax issues

Spring Budget 2017 was relatively uneventful from the tax point of view, compared with the 2016 Autumn Statement. As we are told that this will be the last Spring Budget, this is, perhaps, not altogether surprising.

Personal Tax and NIC

There were, however, the beginnings of an attack on the use of limited companies and self-employment as perceived methods of reducing individuals’ tax liabilities.

The £5,000 nil rate for dividend income is to be reduced to £2,000 for the 2018/19 tax year onwards, marking a further reduction in the favourable treatment of limited companies.

The rate of Class 4 National Insurance Contributions for the self-employed  is to rise from 9% to 10% for the 2018/9 tax year and to 11% in 2019/20.

Business Tax

The entry threshold for the cash basis method of computing taxable profits is to be increased from £83,000 to £150,000, effective from 6 April 2017.

VAT

VAT is to be applied to mobile roaming charges with effect from 1 August 2017.

Overseas Pensions

One of the major surprises in this Budget is the introduction of a 25% tax charge that will apply to pension transfers made to a QROPS (“Qualifying Recognised Overseas Pensions Scheme”) on or after 9 March 2017. Exceptions will be made to allow tax-free transfers where HMRC is persuaded that there is a genuine need, if:

  • the individual and the pension scheme are both in countries within the European Economic Area (EEA) or
  • if outside the EEA, both the individual and the scheme are in the same country, or
  • the QROPS is an occupational pension scheme provided by the individual’s employer

If a tax-free transfer is permitted under these exceptions and the individual’s circumstances change within the 5 tax years following the transfer, the tax treatment will need to be reconsidered.

UK tax rules will apply to payments from funds that have been UK tax relieved and have been transferred to a QROPS on or after 6 April 2017; payments made in the first 5 full tax years following the transfer will be subject to these rules, regardless of the individual’s residence status in the period.

The government estimates that this change of policy will yield additional tax of £65 million in 2017/18, £60 million in 2018/19, £65 million in 2020/21 and £65 million in 2021/22.

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