The Autumn Budget 2016 – The Highlights

The Autumn Budget 2016 – The Highlights

The Chancellor says the government wants to ensure the UK economy is “match-fit” for the transition that will follow the Brexit vote. “So we will maintain our commitment to fiscal discipline”, he says, “while recognising the need for investment to drive productivity”

Economic Growth

Philip Hammond says the Office for Budget Responsibility forecasts economic growth of:

  • 1% in 2016 – down from 2% it forecast before the EU referendum
  • 4% in 2017 – down from 2.2%
  • 7% in 2018 – down from 2.1%
  • 1% in 2019 – down from 2.1%
  • 0% in 2020 – down from 2.1%

“While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4% lower than would otherwise have been the case,” the Chancellor says.

National Debt

Philip Hammond says the deficit – as measured by public sector net borrowing as a percentage of GDP – will fall from 4% last year to 3.5% this year.  It is forecast to continue to fall over the next five years, reaching 0.7% in 2021-22.

“This will be the lowest deficit as a share of GDP in two decades,” he tells MPs.

Philip Hammond accepts that debt will rise until 2018/19, when it is expected to fall for the first time since 2002 – and it will continue to fall thereafter.

Innovation and infrastructure gets £23bn

The Chancellor says the UK needs to become more productive, so that wages can rise and people can enjoy higher living standards. To help with that, he announces a National Productivity Investment Fund of £23bn to be spent on innovation and infrastructure over the next five years.

Philip Hammond pledges more than £1bn for broadband and 5G – a move trailed earlier this week. “My ambition is for the UK to be a world leader in 5G. That means a full-fibre network; a step-change in speed, security and reliability,” he says.

The government will also offer business rates relief on new fibre infrastructure from April, Mr Hammond adds.

Funding for 40,000 new homes

The Chancellor confirms funding for 40,000 new homes and announces a large-scale pilot to give the right to buy to housing association tenants.

“We will focus government infrastructure investment to unlock land for housing with a new £2.3bn Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand.

 

“And, to provide affordable housing that supports a wide range of need, we will invest a further £1.4bn to deliver 40,000 additional affordable homes. And I will also relax restrictions on government grant to allow providers to deliver a wider range of housing types,” Mr Hammond says.

“I can also announce a large-scale regional pilot of Right to Buy for Housing Association tenants – and continued support for homeownership through the Help to Buy: Equity Loan scheme and the Help to Buy ISA.”

Taxation

  • First tax rise – Insurance premium tax to increase from 17% to 20% from June 2017.
  • Small businesses in rural areas a tax break worth up to £2,900 per year by increasing the Rural Rate Relief.
  • Pensions – where someone is already in drawdown the annual allowance will be reduced from £10,000 per annum to £4,000 per annum.
  • Philip Hammond confirms the government will still raise the personal allowance to £12,500, and the threshold for the higher tax rate to £50,000, by the end of this Parliament.
  • The National Living Wage will increase from £7.20 to £7.50 in April next year.
  • Cancel fuel duty rise – average saving of £130 per year, per driver.

Letting Agents

Letting Agents in England to be banned from imposing upfront fees on tenants.

Autumn statement to be abolished.

Please note this article is for information purposes only.

The Budget 2016 – The Highlights and Summary

The Budget 2016 – The Highlights and Summary

George Osborne has revised down the UK’s growth forecast in his 8th Budget and warns about a “dangerous cocktail” of global economic risks. However, he believes the UK is “well placed” to handle it. Mr Osborne will seek to save £3.5bn by 2020 through extra spending cuts.

  • He froze fuel duty but announced a 2% increase in tax on cigarettes, with 3% on rolling tobacco.
  • He said the £530m raised by a tax on the makers of sugary drinks would be spent on boosting school sports.

Mr Osborne said the Office for Budget Responsibility had made clear its forecasts were based on the assumption the UK would remain in the UK and had warned that “there appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty”.

Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement and GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago.

Key Announcements 

  • Mr Osborne confirmed that he has failed to meet a fall in debt as a proportion of GDP this year.
  • The UK is still on course to clear its deficit by 2019/20.
  • Corporation tax to be cut to 17% by April 2020 – great news for small business.
  • An extra £700m for flood defences – to be paid with a 0.5% increase on the tax on insurance premiums.
  • Reforms to business rates which will mean 6,000 small businesses pay no rates and 250,000 have their rates cuts from April 2017.
  • New action to tackle overseas retailers who who store goods in Britain and sell them online without paying VAT.
  • New tax free allowances for “micro entrepreneurs” who rent their homes or sell services through the internet.
  • Chancellor George Osborne has unveiled a tax on the makers of sugary soft drinks to tackle childhood obesity.

Savings, Allowances and Tax

  • A new lifetime ISA to be introduced allowing anyone under 40 to save £4,000 per annum till age 50 and receive tax relief at 25%.
  • ISA limit to increase from £15,240 to £20,000 in April 2017.
  • Personal allowance to increase to £11,500 by April 2017.
  • Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers.
  • The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017.
  • The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished.

Business

  • Headline rate of corporation tax – currently 20% – to fall to 17% by 2020.
  • Anti-tax avoidance and evasion measures to raise £12bn by 2020.
  • Annual threshold for small business tax relief to be raised from £6,000 to a maximum of £15,000, exempting thousands of firms.
  • Supplementary charge for oil and gas producers to be halved from 20% to 10%.
  • Petroleum revenue tax to be “effectively abolished”.
  • £9bn to be raised by closing corporate tax loopholes and tax minimisation schemes.
  • Use of “personal service companies” by public sector employees to reduce tax liabilities to end.
  • Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight.
The Budget March 2015 – The Overview

The Budget March 2015 – The Overview

Proposed pension measures

The Lifetime Allowance reduces from £1.25m to £1m on 6th April 2016, but will increase annually by CPI from 6th April 2018. Transitional protection will protect existing pension rights.

On a positive note, the Annual Allowance is unchanged at £40,000 and higher and additional rate tax relief remains available for individual pension contributions.

In addition to the 6th April 2015 ‘Freedom and Choice in Pensions’ reforms, people already receiving annuity income will, from April 2016, be able to have their annuity income assigned to a third party in exchange for a lump sum or an alternative retirement product.

Increases to Income Tax bands and allowances

Proposed rises to the personal allowance and basic rate limit will result in the higher rate threshold, above which individuals pay income tax at 40%, increasing from £42,385 in 2015/2016 to £42,700 and £43,300 for 2016/2017 and 2017/2018. A large percentage of the population will still be higher rate tax payers who can benefit from tax-relieved pension saving at 40%.

Proposed ISA changes from Autumn 2015

Individuals will be able to withdraw and replace money from their cash ISA in the same tax year without it counting towards their annual ISA subscription limit.

A new Help to Buy ISA will be introduced. For every £200 a first time buyer saves, the Government will provide a £50 bonus up to a maximum of £3,000 on £12,000 of savings, at the point they use their savings to purchase their first home.

A new Personal Savings Allowance from 6 April 2016

Intended to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. Additional rate taxpayers will not receive an allowance.

It’s interaction with the £5,000 0% band for savings income may cause confusion, however low earners will potentially be able to benefit from both and pay no tax on their savings where total taxable income is less than £16,800 in 2016/2017.