Hammond’s Autumn Statement 2016: No more Autumn Statement?

In his first –and last– Autumn Statement, the new Chancellor outlined prospective plans for the British economy, in light of the decision to leave the EU. There was a great deal of interest surrounding the announcement, as it was also the first formal economic address of the Theresa May Government.

The statement was received positively by some, who felt that Hammond bore early Christmas presents: increases to tax allowances, the national living wage, and a new savings bond. It also included major overhauls of housing and benefits.

Autumn Statement 2016: Key Measures

The Autumn Statement is to be abolished. From 2017,  it will be replaced by an Autumn Budget; Spring Statements will begin in 2018.

Tax

  • Tax-free Personal Allowance is set to rise to £11,500 in April and £12,500 by the end of parliament.

  • The Basic Rate threshold will increase to £50,000 by 2020.

  • Corporation Tax is to fall to 17% as planned.

  • The National Living Wage will increase from £7.20 to £7.50 in April 2017.

  • Measures will be introduced to clamp down on tax avoidance schemes.

  • Insurance premium tax is set to rise from 10% to 12%.

  • Tax savings on salary sacrifice and benefits in kind are to be stopped.

  • Rural Rate Relief is to be increased to 100%, giving SMEs a tax break worth up to £2,900. 

  • The charges for Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for 2017/18.

Savings

  • A new savings bond will be introduced by NS&I. Savers can deposit up to £3000, with an interest rate of 2.2% over three years. Two million account holders are expected to benefit.

Benefits

  • The Universal Credit earnings taper rate is set to fall from 65% to 63% from April 2017. The rate affects the amount of support paid out to workers on in-work benefits. This is expected to cost the economy £700m.

NI

  • NI contributions made by employers and employees are to be equalised at £157 per week from April 2017.

Public Finances and Spending

  • Borrowing will be higher due to lower growth. The Office for Budget Responsibility has forecasted that government borrowings will total £68.2bn this year. It predicts £59bn to be borrowed in 2017/18, subsequently falling to £46.5bn, £21.9bn, £20.7bn and reaching £17.2bn in 2021/22.

  • Public spending this year is to constitute 40% of GDP – down from 45% in 2010.

  • Plans for a Budget surplus by 2020 have been scrapped, in view of the uncertainty facing the economy and slower growth forecasts.

  • There is to be a £23bn fund for innovation and infrastructure over the next 5 years.

  • An additional £400m will be poured into venture capital funds, to help start-ups develop, and unlocking £1bn of new finance for growing firms.

  • From April 2017, there are to be restrictions for corporate interest relief.

  • Research and development (R&D) will see an extra £2bn a year in funding by 2020.

Motoring

  • Fuel duty rise has been frozen for the seventh year, at a cost of £850 million. This will save the average driver £130 a year.

Housing

  • A housing infrastructure fund of £2.3bn will be introduced for 100,000 new houses in areas of high demand.

  • £1.4bn is to be aimed at delivering 40,000 affordable new homes.

  • £1bn will be used to help upgrade Britain’s broadband to “full fibre” to benefit people in rural areas. £400m is to be used for the purpose of innovation.

  • Upfront fees to tenants, often imposed by lettings agents in England, are to be banned. This will happen ‘as soon as possible’, the chancellor said.

 

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