Chancellor Philip Hammond delivered his first Autumn Statement and we’ve pulled together the key points and our initial response.
Abolishing the March Budget
There will now be an annual autumn Budget from 2017 and only a statement in the Spring from 2018, which will be a response to latest OBR forecasts and not a major fiscal event. This is a long overdue reform. Announcing tax changes in Autumn allows the legislation to be passed before the tax year starts – rather months after the legislation is already in force.
Tax-free personal allowance to rise to £11,500 in April 2017 and forecast to go up to £12,500 by the end of the Parliament along with increasing the basic rate band to £50,000.
The government will take further measures to clamp down on tax avoidance to raise around £2bn over the five-year period. A key issue is that it will become an offence to help someone else to use a tax avoidance scheme.We hope that this will help prevent certain financial advisers from selling schemes which some of our clients have taken believing them to be merely investment schemes.
From April 2017, employers and employees using “salary sacrifice” schemes will “pay the same tax as anyone else”. Pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exemptpensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt. The detail of this will be important for some clients whose employers have introduced such schemes. It is not clear how this will affect small employers who negotiate all salaries on an individual basis.
Insurance premium tax to rise from 10% to 12%
Government will stick to plans to cut corporation tax from 20% to 17%
Growth expected to be 2.4% lower than it would have been pre-Brexit vote. The Guardian is estimating that this is a loss of £1,000 per citizen in the UK. The economy is expected to increase by 2.1% this year – up from the earlier forecast of 2%. However, growth expected to be lower at 1.4% in 2017 and down in 2018 with recovery following in the later years.
The key weaknesses in the economy have been highlighted as housing, the north-south divide and lack of productivity. Whether these measures adequately address these issues is another question.
£1 billion is to be designated for digital infrastructure. A £2.3bn housing infrastructure fund is to be put in place to deliver infrastructure for up to 100,000 new homes in areas of high demand with a further £1.4 billion for 40,000 additional homes. A £23b fund for innovation and infrastructure will be instigated over the next five years focusing on ‘investing today for the economy of the future’
For business £1.8 billion will be available for English regions local growth funds.
Doubling UK Export Finance capacity
£400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms.
Rural Rate Relief to be increased to 100%, “giving small businesses a tax break worth up to £2,900”.
The National Living Wage to rise from £7.20 to £7.50 from April, a pay rise worth more than £500 to a full-time worker.
A new market-leading savings bond is to be activated through National Savings and Investments, with an interest rate of 2.2% and a term of three years. Savers will deposit up to £3,000 and two million expected to benefit.
There is to be a ban on upfront letting agent fees with the aim of making it financial easier for people to rent.
Higher rate income tax threshold to rise to £50,000 by the end of the Parliament.
Welfare spending was previously noted as “spiralling out of control” but it has now stabilised and there will be no further savings in this Parliament beyond those previously announced.
Universal Credit taper falls from 65% to 63% – effectively a targeted tax cut worth £700m in 2021/22 to those on low incomes. It’s designed to increase incentives to work and help three million households. The rate affects how much is clawed back from some workers on in-work benefits.
Fuel duty rise will be frozen for the seventh year in succession, saving the average car driver £130 a year and the average van driver £350.
There will be increased restrictions on cold-calling to sell pension “advice” which has often been fraudulent.