The post-Brexit referendum Autumn Statement was never going to be pretty. But even forecasters hadn’t anticipated the scale of Governments borrowing projections in Philip Hammond’s first Autumn Statement. At £100bn it’s the equivalent of the entire NHS budget and over half of this figure is the anticipated costs of Brexit. Whilst no-one is projecting a recession, with growth forecasts of +1.7% in 2018 raising to +2% by 2021, it’s clear that challenging times are ahead. We review the key points arising and how they may affect you and your business.
Autumn Statement 2016: Key points for individuals and business
Personal taxation and savings
- From April 2017, the basic level of Income tax threshold will apply to earning above £11,500 with an upper limit of £45,000 before higher rates of tax apply.
- Salary sacrifice schemes will be taxed as if they are cash – effectively scrapping benefits in kind, with exception of ultra-low emission cars, pensions payments, childcare and cycle to work which will be exempt.
- National Living Wage to rise from £7.20 an hour to £7.50 from April next year
- Employee and employer National Insurance thresholds to be equalised at £157 per week from April 2017
- Money purchase annual allowance (MPAA). The amount that can be saved into a pension will be reduced from £10,000 to £4,000 in April 2017.
- Insurance premium tax to rise from 10% to 12% next June
- A new National Savings Bond. Will be introduced in spring 2017, providing a three-year investment bond with an indicated rate of 2.2% gross for investments from £100 to £3,000.
- Universal Credit taper rate to be cut from 65% to 63% from April at a cost of £700m
- No plans for further welfare savings in this Parliament
- The introduction of a ban on upfront fees being charged by letting agents in England. Tenants are currently being charged an average of £223.
- An additional £2.3bn housing infrastructure fund to help provide services for up to 100,000 new homes in high-demand areas including new services such as roads and water connections.
- £1.4bn to build up to 40,000 extra affordable homes by 2020-21. These will include properties for rent or shared ownership.
- £1.7bn to speed up the construction of homes on public sector land.
- Fuel duty rise to be cancelled for the seventh year in succession – saving an average car driver £130 and van driver £350 a year
- For the oil and gas sector, the Carbon Price Support capped until 2020 and business rates reductions worth £6.7bn
- £1.1bn extra investment in English local transport networks
- £220m to reduce traffic pinch points
- £23bn to be spent on innovation and infrastructure over five years
- £2bn per year by 2020 for research and development funding
- Doubling UK Export Finance capacity
- £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms
- £23bn National Productivity Investment Fund (NPIF). Which will provide additional spending in areas such as transport, digital communications and R&D aimed at increasing productivity.
- A raft of new legislation:
- The removal of Income Tax reliefs on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement.
- The removal of Capital Gains Tax (CGT) exemption relating to shares received as consideration for entering an employee shareholder agreement on or after the 1st June 2016.
- Shares received under agreements made before this date are not affected. Corporation Tax reliefs for employer companies are not affected.
- Corporation Tax changes reaffirmed, bring the rate to 17% by 2020.
- Rural rate relief doubled for businesses in rural areas with a population under 3,000. Bring the relief from 50% to 100% from April 2017.
- VAT flat rate scheme changes. New tests will be introduced that will determine the flat rate percentage used by businesses and a new “limited cost trader” will be introduced at a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.
- 100% tax allowance for provision of electric vehicle charging points
National Living Wage: From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is the equivalent of a wage increase of just over 4%.
- The National Minimum Wage (NMW) thresholds will increase to:
- 21 to 24 year olds – from £6.95 to £7.05 per hour
- 18 to 20 year olds – from £5.55 to £5.60 per hour
- 16 to 17 year olds – from £4.00 to £4.05 per hour
- Apprentices – from £3.40 to £3.50 per hour
National Insurance thresholds: From April 2017, the National Insurance thresholds for employees and employers will be aligned at £157 per week. There will be no cost to employees and the maximum cost to business will be an annual £7.18 per employee.