Chancellor Philip Hammond’s presentation of the Autumn Budget 2017 statement endeavours to boost sluggish growth and protect Britain’s finances from the uncertainty of Brexit.
Mr. Hammond did say that this Autumn Budget was ‘much more than Brexit’ – nevertheless. Chancellor Hammond added some humour to his speech, referring to Prime Minister May’s conference speech, remarking that he had brought a packet of cough sweets ‘just in case’. He also made reference to driverless cars in which it would not be the first time Jeremy Clarkson would be ‘snubbed’ by Hammond and May.
- First-time buyers benefit from stamp duty axed up to £300,000 purchase level.
- UK Economy is expected to grow at 1.5% in 2017, a downgrade from 2% forecast in March.
- Personal Allowance increase and will rise to £11,850 in April 2018
- Higher rate tax threshold to increase to £46,356
- National Living Wage to rise in April 2018 by 4.4% from £7.50 per hour to £7.83 per hour.
An at-a-glance summary is provided. Key planning points in relation to Enterprise Investment Schemes (EIS) and the restrictions will be published once the devilish detail is fully understood.
Lifetime Allowance increase from April to £1,030,000
There was no more detail in relation to pensions in the autumn budget. A working example of the increase may help; for example, if a pension holder has a pension pot of £1.1million, with no lifetime allowance protection and fully crystalises their benefits in February 2018, the excess of £100,000 would be taxed at 55% – if taken as a lump sum.
If, however, the pension holder delayed taking benefits until the start of the following tax year, when the allowance increases to £1.03 million, the tax on the excess would be reduced to £38,500 – saving £16,500. For some, this will provide an opportunity to save tax created by the Lifetime Allowance.
Junior ISAs will be increased in line with CPI to £4,260 p.a. However, the current ISA limit of £20,000 will remain.
Summary of Autumn Budget 2017: Key points at-a-glance
Stamp duty and housing
- Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000
- To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty
- 95% of all first-time buyers will benefit, with 80% not paying stamp duty
- Reduction will apply immediately in England, Wales and Northern Ireland although the Welsh government will have to decide whether to continue it when stamp duty is devolved in April 2018
- It will not apply in Scotland unless Scottish government decides to follow suit
- £44bn in government support to boost construction to meet target of building 300,000 new homes a year by the middle of the next decade
- 100% council tax premium to be levied on empty properties
- Compulsory purchase of land banked by developers for financial reasons
- Review into delays in developments given planning permission being taken forward
- £28m for Kensington and Chelsea council to provide counselling services and mental health support for victims of the Grenfell fire and for regeneration of surrounding area
- New homelessness task force
Alcohol, tobacco, gambling, and fuel
- Tobacco will continue to rise by 2% above Retail Price Index (RPI) inflation while the minimum excise duty on cigarettes introduced in March will also rise
- Duty on hand-rolling tobacco will increase by additional 1%
- Duty on beer, wine, spirits and most ciders will be frozen
- But duty on high-strength “white ciders” to be increased via new legislation
- Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped
- Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018
- Tax hike will not apply to van owners
- Existing diesel supplement in company car tax to rise by 1%
- Proceeds to fund a new £220m clean air fund
Personal taxation and wages
- Tax-free personal allowance on income tax to rise to £11,850 in April 2018
- Higher-rate tax threshold to increase to £46,350
- Short-haul air passenger duty rates and long-haul economy rates to be frozen paid for by an increase in premium-class tickets and on private jets
- National Living Wage to rise in April 2018 by 4.4%, from £7.50 an hour to £7.83.
The state of the economy
- Growth forecast for 2017 downgraded from 2% to 1.5%
- GDP downgraded to 1.4%, 1.3% and 1.5% in subsequent years before rising to 1.6% in 2021-22
- Productivity growth and business investment also revised down
- Annual rate of CPI inflation forecast to fall from peak of 3% towards 2% target later this year
- Another 600,000-people forecast to be in work by 2022
- £3bn to be set aside over next two years to prepare UK for every possible outcome as it leaves EU
The state of the public finances
- Annual borrowing £49.9bn this year, £8.4bn lower than forecast in March
- Borrowing forecast to fall in every subsequent year from £39.5bn in 2018-19 to £25.6bn in 2022-23
- Public sector net borrowing forecast to fall from 3.8% of GDP last year to 2.4% this year, then 1.9%, 1.6%, 1.5% and 1.3% in subsequent years, reaching 1.1% in 2022-23.
- Debt will peak at 86.5% of GDP this year, then fall to 86.4% next year; then 86.1%, 83.1% and 79.3% in subsequent years, reaching 79.1% in 2022-23.
Welfare and pensions
- £1.5bn package to “address concerns” about the delivery of universal credit
- Seven-day initial waiting period for processing of claims to be scrapped
- Claimants to get 100% advance payments within five days of applying from January
- Typical first payment will take five weeks rather than current six
- Repayment period for advances to increase from six to 12 months.
- New universal credit claimants in receipt of housing benefit to continue to receive it for two weeks
Business and digital
- VAT threshold for small business to remain at £85,000 for two years
- £500m support for 5G mobile networks, fibre broadband and artificial intelligence
- £540m to support the growth of electric cars, including more charging points
- A further £2.3bn allocated for investment in research and development
- Rises in business rates to be pegged to CPI measure of inflation, not higher RPI
- Digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction to be subject to income tax as part of tax avoidance clampdown. Expected to raise about £200m a year
Education (England only)
- £40m teacher training fund for underperforming schools in England. Worth £1,000 per teacher
- 8,000 new computer science teachers to be recruited at cost of £84m
- Secondary schools and sixth-form colleges to get £600 for each new pupil taking maths or further maths at A-level or core maths at an expected cost of £177m
- Cash for maths, no extra on school budgets
- £320m to be invested in former Redcar steelworks site
- Further devolution of powers to Greater Manchester
- £1.7bn transport fund for city regions to be spent by mayors
- £2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive
- Scottish police and fire services to get refunds on VAT from April 2018
- Young person’s railcard extended to 26-30-year-olds
- Budget gives extra £1.2bn to Wales
- Extra £650m for Northern Ireland in Budget
Health and social care
- £2.8bn in extra funding for the NHS in England
- £350m immediately to address pressures this winter, £1.6bn for 2018-19 and the remainder in 2019-20
- £10bn capital investment fund for hospitals
We hope the overview helps with your understanding of the Autumn Budget.
If you have any questions about the autumn budget or require advice, simply get in touch with us and we will do all we can to help.