Autumn Statement
Chancellor Hammond in his Autumn Statement of 2016 mapped out the next decade as best he could. In contrast to former Chancellor George Osborne, where a keen eye was kept on national debt, Gross Domestic Product (GDP) and austerity measures post the great recession of 2008; Philip Hammond set out a period of extended borrowing, with a stop on welfare cuts and increased investment in businesses, transport and infrastructure.
All very well and good if you are an economist; but from a domestic perspective, a closer look at living costs, housing, technology, economic growth, business, transport and income will help to understand how the Autumn Statement will effect UK residents.
Living costs
The freeze on fuel tax is extended for the seventh year bringing an average annual car driver saving of £130 and an annual average van driver saving of £350.
There will be a further increase to Insurance Premiums Tax (IPT) from 10% to 12% effective from June 2017. This will effect: cars, homes and private medical cover insurances.
The average household is expected to pay an additional £51 in insurance annually. Measures have been announced to cut whiplash claims which; is expected to reduce car insurance premiums by £41 on average per annum.
Insurance industry experts have complained that this IPT increase follows two previous IPT increases, all of which have fallen in an 18month period. They expect that the rise in tax will increase premiums for 50m UK residents and have dubbed it “the stealth tax”.
Housing
As homeownership is in decline in the UK and private rent is increasing in price, the Chancellor has pledged additional funding to make housing more affordable for first time buyers, and also where there is significant housing demand.
Charging tenants fees for rented accommodation, (typically charges were made against tenants for reference and finance checks,) have been banned.
A fund of £2.3bn has been given over to Housing Infrastructure investment, a frequent blocker to planning permission being granted. The fund is to be allocated to open up sites for 100,000 new homes in high demand areas such as London and the southeast.
The construction of 40,000 affordable homes has received funding of £1.4bn. Funding for a right-to-buy regional pilot scheme will enable 3,000 housing association residents to buy their properties at a discounted rate.
Income, work and transport
As anticipated tax breaks are being given to the working population while some tax breaks are being refined to fund those that are working and Just About Managing (Jams).
Workers will be exempt from paying tax until they reach annual earnings of £12,500 or over.
Salary sacrifice; where employees are permitted to trade their salary for perks will be curbed but, ultra low emission cars, childcare and cycle to work schemes will be excluded from plans to scrap employee tax breaks.
Working families will be eligible for 30 hours a week of free childcare for all three and four year olds from September.
The National Living Wage is being increased from £7.20 to £7.50 per hour effective from April 2017.
Universal Credit the single monthly payment for people that are unemployed or on low incomes will be increased by £700m for an estimated three million families. Individuals will be paid £0.65, as opposed to £0.63, for every additional £1.00 earned by them through work over their work allowance threshold.
English local transport networks receive £1.1bn in funding, £220m for ‘pinch points’ on national roads, £450m to trial digital signaling on railways and £390m for development of low emission vehicles.
East West Rail receive £110m of funding and a commitment to deliver the new Oxford to Cambridge Expressway.
A new savings bond, with an interest rate of about 2.2% will be launched through National Savings and Investments. The bond will be available to those aged 16 and over, where a minimum investment of £100 and a maximum investment of £3,000 has been set. Savers must invest for three years. The new product will be available for 12 months from spring 2017.
New limits are to be placed on the reinvestment of pension pot savings. The new tax-free allowance falls from £10,000 to £4,000 in April, affecting all of those who would wish to take money from their defined contribution pension pot.
Technology
In an effort to boost productivity Hammond pledged £23bn to a new national productivity investment fund. Monies will be allocated towards technology and scientific innovation.
As part of Chancellor Hammond’s vision for the “UK to be a world leader in 5G” £1bn in funding goes towards 5G and digital infrastructure.
New fibre infrastructure will receive 100% business rates tax relief for the first five years.
Economic and business growth
Recognising the difficulties that start-up businesses face in funding Hammond pledged £400m for venture capital funds to unlock £1bn of finance for start-ups.
Noting the migration of workers to cities, more budgetary control and funding is being given to elected mayors and city-based Local Enterprise Partnerships (LEPs).
Taking £1.8bn from Local Growth Fund for English regions: £556m is given over to LEPs in the North of England, £542m to the Midlands and East of England, and £683m to LEPs in the South West, South East and London.
London will receive £3.15bn as its share of national affordable housing funding to deliver more than 90,000 homes, as well as full control over its adult education budget.
Corporation tax will be reduced from 20% to 17%.
Summary
In summary, though the UK will borrow £122bn more than predicted before the EU referendum over the next five years, growth forecasts and unemployment remain forecast as low but steady. Domestically there have been changes to pensions, income and wages, also insurance premiums which; effect the cost of living.
For expert financial and inheritance tax planning advice in fast-changing times, speak to a MarchwoodIFA expert.