Budget 2017 | NatWest

Budget 2017

What it means for you

Read the summary
Richard Ramsey, Senior Economist, NatWest
Add your signposting title here… Summary from Richard Ramsey
This was a positive speech from the Chancellor. With growth up and borrowing down, he was much more upbeat. However, the improvement in the economic growth forecast and the public finances are short term – the long-term challenges remain. Some of the most noteworthy aspects of his speech related to the economy and public finances rather than new policies.

The budget had no surprises and many of the aspects mentioned were very much of a ‘to be continued’ mindset, with a second budget coming later this year as well as the continued austerity measures. We’re moving towards a ‘more tax, less spend’ model, and on the tax model, it was very much a ‘tax on selfies’. National Insurance Contributions for the self-employed will rise to 11% in the next two years, bringing it in line with their counterparts. In addition, the tax-free dividend allowance will be lowered to £2,000 in April 2018.

Finally, it’s worth remembering policies announced in previous budgets come into effect this April - such as the apprenticeship levy and the increase to the tax free savings allowance for ISAs.

Richard Ramsey
Senior Economist, NatWest

What you need to know

Families

From September, the amount of free childcare on offer will double to 30 hours a week for working families with three- and four-year-olds; worth up to £5,000 for each child a year.


There was one notably quirky announcement in the Budget – the sugar tax will actually bring in less revenue than expected because drinks manufacturers have changed their formulas. This is, of course, good news for children’s health – and the government announced that it would maintain its commitment of £1bn towards school sports and healthy living programmes.

Education

The Chancellor has pledged £320m towards 140 new schools and £216m will be invested in school maintenance.


The government has also recognised that younger generations may well have longer working careers than their older counterparts so will invest £40m in pilot schemes for lifelong learning projects.

Car icon

Fuel Duty

The government has decided to freeze fuel duty for the seventh year running further to petrol prices rising by almost 20% since last Spring’s Budget.

Alcohol duty

There are no new increases to previously planned duties on alcohol or tobacco. Duty on beer, cider, wine and spirits will increase in line with RPI inflation. This equates to 2p on a pint of beer, 1p on a pint of cider, 36p on a bottle of whisky and 32p on a bottle of gin.There is a new minimum excise duty on cigarettes based on a packet price of £7.35.

Tax in general

The personal allowance for the next tax year will be increased to £11,500; the higher-rate threshold will increase to £45,000.

Savings

The Chancellor has confirmed that the ISA limit has been increased by almost a third to £20,000 a year. The Lifetime ISA will be introduced in April 2017; younger adults can save up to £4,000 a year and receive a bonus towards their first home or retirement.

Social welfare and the NHS

£2bn will go towards social welfare over the next three years, with half of it being made available within the next 12 months.

 

The NHS will receive £425m to improve its local services, including £100m on placing more GPs in A&E departments.

Women & Equality

The Prime Minister and Chancellor both maximised the opportunity to highlight the fact the Budget took place on International Women’s Day with a number of new initiatives: a new £20m fund will go towards combating violence against women and girls; £5m will be dedicated to ‘returnships’ – helping people back to work after career breaks; and £5m will be spent on projects to celebrate the centenary of the 1918 Representation of the People Act, when women first got the vote.

Transport

Vehicle excise duty (VED) for cars, vans and motorcycles registered before April 2017 will increase by RPI.

 

£220m will go towards addressing pinch points on the national road network, with £90m dedicated to the North of England and £23m for the Midlands. There will also be a £690m competition for local authorities to tackle urban congestion.

Jobs

The headline news for the self-employed is that the government is abolishing Class 2 National Insurance Contributions (NICs) from April 2018, which is good news for those with profits of £5,965 or more, who will be better off. In the Chancellors speech he announced the main rate for Class 4 NICs would increase from 9% to 10% with a further rise to 11% in April 2019.

 

However on 15th March plans to increase National Insurance levels for self-employed people were dropped. Chancellor Philip Hammond said the government will not proceed with the increases which were criticised for breaking a 2015 manifesto pledge. The U-turn now means that the Chancellor faces a £2bn shortfall in projected revenue over the next 4 years.

Business Rate Tax

Corporation tax will be cut to 19% from April, with a further cut to 17% by 2020.


Small businesses losing their rate relief will see a cap on rates rise of no more than £50 a month.

 

There is a reduction in the tax-free dividends allowance from £5,000 to £2,000 from April 2018.

 

For businesses below the VAT registration threshold, there will be a one-year delay in the introduction of quarterly reporting so they have more time to adjust to the changes.

Infrastructure

The National Productivity Investment Fund (NPIF) was established in the Autumn Statement to provide over £23bn of high-value investment through to 2022. The NPIF will invest £740m in digital infrastructure to support the next generation of fast and reliable mobile and broadband communications for consumers and businesses, with up to £16m invested in developing 5G technology and £200m towards full-fibre broadband networks.

 

Looking at the disruptive technologies sector, £270m will go towards biotech, robotics systems and driverless vehicles.

Economy

The growth forecast for 2017, according to the Office for Budget Responsibility (OBR), has been upgraded from 1.4% to 2%. However, GDP has been downgraded to 1.6% next year, before gradually working its way back to 2% in 2021.

 

The UK was the second-fastest growing economy in the G7 in 2016 (Germany was top), while the inflation forecast is set to rise to 2.4% in 2017/18.

 

As for annual borrowing, the figure of £51.7bn for 2016/17 is £16.4bn lower than forecasted but it will rise to £58.3bn in 2017/18 before falling to £16.8bn by 2022.

Thanks, we appreciate the feedback.

Please tell us what you thought about this article.

"Invalid Characters: \/\\:&()<>"

Did you find this useful?

Cookies must be enabled

Need a financial review?
Get in touch
Set Tab for lightbox