Philip Hammond

Spring Budget 2017: £435m business rates relief package announced




Chancellor of the Exchequer Philip Hammond has unveiled a £435m business rates relief package in response to concerns about the effects of the 2017 business rates revaluation.

In his first and last spring Budget, the chancellor announced that no business coming out of small business rate relief will see their bill increase next year by more than £50 a month, with subsequent increases capped at either the transitional relief limit or £50 a month, depending on which is higher.

Mr Hammond also revealed a £1,000 discount on business rates bills in 2017 for all pubs with a rateable value of less than £100,000 – or 90% of UK pubs.

Meanwhile, local authorities will receive a £300m fund to deliver discretionary relief to target individual hard cases in their local areas.

“Business rates raise £25bn per year – all of which, by 2020, will be going to fund local government,” explained Mr Hammond, “so we cannot abolish them, as some have suggested.”

“But the revaluation has undoubtedly raised some hard cases, especially for those businesses coming out of small business relief.

“So today, as I promised many of my [Right Honourable Friends] I would, I address those concerns with three measures which apply to the national business rates system for England.”

Self-employed National Insurance contributions

Mr Hammond also used the Budget to address what he believed was an unfair disparity in National Insurance contributions (NICs) between the self-employed and regular employees.

The chancellor stated that an employee earning £32,000 would incur £6,170 of NICs between them and their employer, while a self-employed person would pay just £2,300.

This lower National Insurance is forecast to cost the UK’s public finances over £5bn in 2017 alone.

“That is not fair to the 85% of workers who are employees,” insisted Mr Hammond.

From April 2018 – when the Class 2 NIC is abolished – the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further increase of 1% in April 2019.

These measures are expected to raise a net £145m a year for public services by 2012/22, an average of around 60p a week per self-employed person in the UK.

As Class 4 is chargeable as a proportion of profits, all self-employed people earning less than £16,250 will still see a reduction in their total NICs bill.

“Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way.

“This change reduces the unfairness in the NICs system and reflects more accurately the current differences in benefits available from the state,” added Mr Hammond.

Tax-free dividends

Mr Hammond also highlighted the inequality between an employed worker and one who had set up their own company by announcing a major reduction in the tax-free dividend allowance.

From April 2018, each director or shareholder will be able to take £2,000 of dividends out of their company tax free, less than half the “extremely generous” current allowance of £5,000.

About half the people affected by this measure are directors or shareholders of private companies, with the rest investors in shares with holdings typically worth over £50,000 outside Isas.

Mr Hammond said: “The gap in total tax and NICs between an employed worker and one who has set up his own company will normally be greater even than the gap with the self-employed, and there are several perfectly legal ways in which that gap can be made bigger still.

“This is not fair.

“And it’s not affordable.”

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