The Spring Budget 2017, delivered by Chancellor Philip Hammond on 8 March, was billed as being notable for the fact that it would be the last ever spring budget. Going forward the budget will be shifted to the autumn, with the equivalent of the Autumn Statement now taking place in spring.
That might be the case, but the final spring budget also made headlines for other reasons and brought the issue of self-employment into the limelight.
National Insurance Contributions
One big change for the self-employed is around National Insurance contributions (NICs) these will increase.
Currently, the self-employed may have to pay both Class 4 and Class 2 NICs:
- Class 4 NICs at 9% are paid on profits between £8,060 and £43,000.
- Class 2 NICs are paid on profits of £5,965 or more.
It has been stated that from 2018, Class 2 NICs will be abolished. Class 4 NICs will rise to 10% in April 2018 and to 11% in April 2019.
Tax-free dividend allowance
Another measure expected to impact the self-employed is the tax-free dividend allowance for shareholders. This is set to be reduced from £5,000 to £2,000 from April 2018. This could have a major effect on small traders who set up as companies and pay themselves through a combination of salary and dividends.
Chris Bryce, chief executive of IPSE, which represents self-employed workers, told the BBC: "The reduction in dividend tax allowance, whether you work as a sole trader or through a limited company [will mean] you will be facing higher bills."
Income tax threshold
It was also confirmed that the income tax threshold would rise to £11,500 a year from April. The threshold for those paying higher rate tax will also rise from £43,000 to £45,000. This will affect both salaried workers and the self-employed.
If you're self-employed and concerned about the changes discussed in the Spring Budget 2017, contact us by email on