Spring Budget 2017 – The highlights, insurance and what you need to know
On 8th March, Philip Hammond, Chancellor of the Exchequer, delivered his first and last Spring Budget to Parliament. The government will now transition to a single fiscal event each year, the Autumn Budget.
With Brexit firmly on the mind and a backdrop of economic resilience since the referendum. Hammond reported on ‘an economy that has continued to confound the commentators with robust growth.’ He also 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.
The key points
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. It is now forecasting GDP to grow 2 per cent in 2017 (up from 1.4). It will then slow to 1.6 per cent in 2018 (down from 1.7), and bounce back to 1.9 and 2 per cent in 2020 and 2021.
As businesses face uncertainty following the Brexit vote, the OBR’s forecast for business investment showed some improvements since the Autumn Statement. It was concluded that business investment declined 1.5 per cent in 2016 (up from 2.2). The OBR estimates business investments will shrink 0.1 per cent in 2017 (up from 0.3). It will then return to growth with 3.7 per cent in 2018 (down from 4.1), 4.2 per cent in 2019 (down from 5.3) and 3.9 per cent in 2020 (down from 4.1).
Highlights for businesses and individuals
Insurance Premium Tax (IPT) will increase by 2 per cent. As reported in the Autumn Statement 2016, the IPT, a tax on general insurance premiums, will increase from 10 to 12 per cent in June 2017. This increase means IPT has doubled in fewer than two years, as it was 6 per cent in October 2015. It has been warned that younger drivers and those living in London will bear the biggest burden. It could make 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. Class 4 NICs (paid on profits between £8,060 and £43,000) will rise from 9 to 10 per cent in April 2018 and to 11 per cent in April 2019.
Three measures will amount to £435 million 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
- £1,000 discount for pubs with a rateable value up to £100,000
New consumer protection measures. This includes 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 per cent in April 2017 and 17 per cent in 2020.
For more detail, read the full Spring Budget.
Source: Zywave news brief – Spring Budget 2017 Highlights