In the "final" Spring Budget for Chancellor Philip
Hammond, there wasn't a raft of tax changes announced, or much
news specific to Scotland – but a number of the changes made
across the UK will affect Scottish businesses and taxpayers.
Undoubtedly, the biggest change across the country is the
increase to National Insurance Contributions (NICs) for the
self-employed and the dividend allowance cut. From April 2018 the
NIC rate will increase by 1%, from 9% to 10%, on income up to the
higher rate threshold (£45,000 for 2017-18), meaning that
self-employed individuals will pay up to £368.36 more
– a further 1% will then be added in April 2019.
However, this is still lower than employees who pay NIC at 12% on
the same income.
Both groups will continue to pay NIC at 2% on income above the
higher rate threshold, while organisations will pay an additional
13.8% employer's NIC on earnings paid to their employees, which
is not payable on payments made to the self-employed.
Meanwhile, the dividend allowance will drop from £5,000 to
£2,000 from April 2018, reducing the incentive to gain any
tax advantage through the use of personal service companies. Both
the NIC and dividend changes reflect the more flexible working
practices that now exist – something the Chancellor was keen
The Chancellor confirmed the 2017/18 rates and allowances for
income tax, for those outwith Scotland. The 2017/18 higher rate
threshold of £45,000 in the rest of the UK versus
£43,000 in Scotland creates a differential of £400 of
income tax this year for higher rate earners in Scotland, compared
with their counterparts in the rest of the UK.
In a break with the usual practice, the income tax rates and
bands for 2018/19 for the rest of the UK were not announced in this
Spring Budget. However, the Chancellor did reiterate his
commitment to raising the higher rate threshold (again for
taxpayers not living in Scotland) to £50,000 by 2020.
We will wait to see how the Scottish government responds now
that it has control over income tax rates and thresholds.
Staying in Scotland and, while there were some late reports in
the media prior to the Budget of changes likely to affect the North
Sea, the real detail on these did not materialise in the
Chancellor's statement. Instead he announced plans to publish a
discussion paper in due course. This will review how the tax
system can be used to maximise the length and productivity of
fields in the UKCS.
From a public sector perspective, an additional £350
million has been made available to the Scottish Government –
building on the £800 million additional allocation announced
in November's Autumn Statement. Edinburgh's burgeoning tech
sector could also benefit from the commitment made to reducing the
administrative burden on those claiming R&D tax credits,
although further details on exactly how this will work are still to
There were a number of other positive moves for tech companies
across the board. The introduction of "T-Levels" seeks to
address the disparity in the esteem associated with technical
education, while a £16m investment in a 5G hub and
£200m for local projects in full-fibre broadband networks
will boost connectivity and help place the UK at the front of the
race to the digital future.
So, there's plenty to chew over in this last Spring Budget,
even though the overall number of changes has been relatively low.
But given the number of significant changes coming into effect from
April 2017 perhaps that was to be expected.
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The government has been working to incorporate the changes required as a result of the OECD's work on BEPS Action 5: Harmful Tax Practices, which requires implementation of a Nexus approach to the Patent Box regime.
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