Tricks and treats contained in Fiscal Phil's Budget

Tricks and treats contained in Fiscal Phil's Budget

Chancellor Philip Hammond’s final Budget before Brexit delivered treats for higher rate taxpayers but another blow to the self-employed and landlords.

In the longest Budget speech in a decade, the chancellor also known as Fiscal Phil announced self-employed workers will see their tax bills soar from 2020 onwards with accountants claiming he took from contractors to pay for income tax giveaways.

Mr Hammond said: "Last year we changed the way these (IR35) rules are enforced in the public sector, but widespread non-compliance also exists in the private sector.

"Following our consultation, we will now apply the same changes to private sector organisations as well."

According to tax experts IR35 can reduce a worker's net income by up to 25 per cent, costing the typical limited company contractor thousands of pounds in additional income tax and National Insurance contributions.

The tax grab from the self-employed came as Mr Hammond announced the personal allowance – the amount you earn before you have to start paying income tax– will increase by a further £650 in April 2019 to £12,500.

This increase comes a year earlier than planned, and will be maintained in 2020.

According to Mr Hammond, this means a basic rate taxpayer will pay £1,205 less tax in 2019 to 2020 than in 2010 to 2011.

The amount people will have to earn before they pay tax at 40 per cent will increase from £46,350 to £50,000 in April 2019.

This means that in 2019 to 2020, there will be almost one million fewer higher rate taxpayers than in 2015 to 2016.

Mike Cooper, partner at accountancy firm Moore Stephens, said: "With the Treasury having to find the corresponding £9.6bn to fund the rise in the income tax personal allowances and thresholds, it seems that the self-employed have been an easy target to hit again.

"When this is added to the expansion of the rules on off-payroll working to the private sector, this is another Budget that will hit contractors very hard indeed."

Nothing to spook savers

Despite widespread predictions that he would cut back pension tax reliefs and publish a green paper on contributions to social care costs, the pre-Brexit Budget delivered neither of these.

The lifetime allowance for pensions increased just £25,000 to £1.055m in 2019 to 2020, up from £1.030m in 2018 to 2019.

Tim Holmes, managing director of financial adviser Salisbury House Wealth, said as the increase in the lifetime pension allowance was only in line with inflation it did not go far enough by a long stretch.

He said: "Many ‘ordinary’ public sector professionals such as GPs and teachers will be facing substantial tax charges as regular contributions from their salaries may exceed the limit, which is just far too low."

The Budget also stated the Isa annual subscription limits for 2019 to 2020 will remain unchanged at £20,000, and the annual subscription limit for Junior Isas and child trust funds for 2019 to 2020 will be uprated in line with CPI to £4,368.

Mr Holmes said the Isa limit remaining the same further inhibited savers from current and future tax efficiency.