Today, Sir Philip Hammond dusted off his little red box, to deliver his first budget since becoming Chancellor last July. This will be his second major fiscal statement following last Novembers Autumn Statement.
November saw a change in government tactics, as the Chancellor announced, “No other major economy makes hundreds of tax changes twice a year and neither should we.” This obvious preparation for Brexit negotiations increased uncertainty around how the Spring Budget would play out. Few excepted a dramatic affair and they weren’t wrong, as Philip Hammond delivered a relatively unremarkable budget.
Predictions indicated that post Brexit international competitiveness, tax simplification, business rates, the gig economy, social care funding and pensions would be top priority for Sir Philip Hammond.  Most areas were covered. However, Hammond mentions very little about Brexit in his statement.
Positive Growth Forecasts
The Office for Budget Responsibility upgraded economic forecasts, as the UK economy is now expected to grow 2% as a opposed to 1.4%. Hammond announced that the economic borrowing forecast is broadly unchanged.
The OBR has substantially revised down its short-term forecast of Public Sector Net Borrowing. He says this is attributed to “one-off factors” adding that the OBR does not expect this to lead to “structural improvement over the forecast period.”
Startups, SMEs and Business Rates
Prior to the budget the chancellor was urged to ease the rise of business rates for startups. Many argued that failure to reform tax rates will benefit the European cities eager to steal the UK’s crown as the tech capital of Europe after Brexit.
In response to this today, Hammond noted that business rates will still rise but with some relief for small businesses. In particular he highlighted a £300m hardship fund for those businesses that would be worst hit by the rises. Rate rises will also be capped at £50 a month for businesses losing their existing rates relief.
Arguably one of the more impactful announcements was the reduction of the tax free dividend allowance for shareholders and Directors of small private firms. The figure will fall from £5,000 to £2,000 from April 2018. This will particularly hit those with a large number of shareholdings, in other words the most active of investors. However, the planned increase of the ISA allowance to £20,000 per annum should help to offset this change.
The Chancellor also touched on the tax free personal allowance rise and that the NS&I bond, discussed in the autumn statement, would be available from autumn this year. The Chancellor also revealed that the higher tax rate threshold will increase to £50K by 2020, which certainly got a cheer from the Tory benches.
Tax Rise for the Self-employed
It was expected that the self-employed would be asked to pay a bit more in to the coffers. In the end the Chancellor announced that National Insurance Contributions for the self-employed would rise from current levels of 9% up to 10% in April 2018 and then further up to 11% in April 2019 for those making a profit of over £8,000.
The increases were relatively modest in the end but they could act to deter some from moving from full time employee status to working for themselves.
Hammond says the government is continuing with plans to improve the economy. It wants to make Britain the best place in the world to do business.
“We have a remarkable history. But we look forward, confident our best days are ahead of us”
What does the Spring Budget mean for Investors?
There was certainly no overpowering theme for investors to take away from this budget. It was largely unremarkable as the Government plays their cards tight to their chests ahead of the impending triggering of Article 50.
The cut in tax free dividend allowances was the most notable impact. However, the increase in the ISA allowance should more than offset the impact of this reduction. This increased allowance should see greater amounts of money being invested in to Stocks and Shares ISAs or the Innovative Finance ISA, as investors seek better returns.
The fundamental economic environment of low interest rates, and increasing inflation figures should see more turn to the investment market. This coupled with positive growth forecasts does paint a positive picture for the investment sector over the coming months. However, the expected uncertainty of Brexit still hangs in the air like a stale smell that will only be blown free when someone cracks open the window and the European and British governments can begin to negotiate formally.