Chancellor Philip Hammond delivers an Autumn Budget designed to create an ‘outward looking, free trading nation, a force for good.’
Introducing his Autumn Budget, the Chancellor said that he wanted Britain to be a ‘global Britain that has a prosperous and inclusive economy where everyone has a chance to shine. A civilised and tolerant place, that cares for the vulnerable and nurtures the talented’. He stated that he understands the frustrations of families under pressure and wanted to help them cope with the cost of living.
On the subject of work, the Chancellor stated that ‘1.4m people out of work is 1.4m too many’ and committed to get another 600,000 people back into work by 2022.
He emphasised that his Autumn Budget was about more than just Brexit, although he wanted to make achieving a Brexit implementation agreement a priority and ensure that the country is prepared for every possible outcome as it leaves the EU. Having already invested £700m in Brexit preparations, the Chancellor announced today that another £3bn will be committed over the next 2 years.
He was concerned that debt is still too high and that excessive debt undermines the economy’s security, passing the burden on to the next generation.
He highlighted the fact that the world is on the brink of a technological revolution, with Britain at the forefront and that he wanted to ‘embrace the future and run towards change, not away from it’. He announced that ‘a new technology business is founded every hour: I want that to be every half hour.’
The picture for contractors and small business:
The main issues for contractors and freelancers, and small business generally were addressed as follows:
IR35 in the private sector
Change to the IR35 rules in the private sector, mirroring those implemented in the public sector, were widely expected. JSA, along with IPSE and the FCSA of which we are members, and others lobbied Government repeatedly not to rush any roll-out of the rules. We’re pleased to confirm that instead of a ‘copy and paste’ job in the private sector, Government has agreed to consult on the changes, and the consultation will be carried out in 2018. We therefore expect no change to these rules in April 2018.
VAT registration threshold
There was talk of the VAT threshold being reduced, which would have a significant impact to those working for clients who could not reclaim VAT – for example private individuals (most of whom are not VAT registered of course), or the NHS. The impact would have been to increase the effective prices charged in this situation. The threshold has not been reduced after all, and has been frozen for the next two years.
There are small increases to the income tax personal allowance and higher rate tax threshold. The expected reduction in the ‘tax free’ dividend allowance from £5,000 currently to £2,000 will go ahead in April 18 as expected. The Taylor Review, which looked at the wider issues faced by modern ways of working (platforms like Uber, deliveroo) and zero hours contracts will be considered further by various Government departments.
The newspapers will probably lead on the effective abolition of stamp duty for first time buyers on purchases of up to £300k, and in expensive property areas, the same discount (up to £300k) on properties up to £500k. This discount is worth up to £5,000 to a first time buyer. Beware though, if anyone purchasing (so one half of a couple for example) has owned a property in any way before, even by inheritance, they won’t get the relief. The big question is, will this cause a similar uplift in property asking prices?
On spending there was more money for the NHS, housebuilding, and other priorities including electric cars. As ever, there will be the usual arguments about how many years this spending is spread over, and if it is all new money. Perhaps the public will gradually be more and more capable of deciding for themselves in future – there was also a commitment to spending to improve the quality of teaching in mathematics.
Here is the detailed list of announcements from the Autumn Budget:
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% from 2017 to 2019/2020, 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% to 2% 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 the country for every possible outcome as it leaves the EU
• Annual borrowing is at £49.9bn this year, £8.4bn lower than forecast in the spring budget
• 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% in 2018, 1.6% in 2019, 1.5% in 2020 and 1.3% in 2021, reaching 1.1% in 2022/23
• OBR predicts that debt will peak at 86.5% of GDP this year and then fall to 86.4% next year; then 86.1% in 2019, 83.1% in 2020, 79.3% in 2021, reaching 79.1% in 2022/23
• National Productivity Investment Fund extended for a further year to more than £31bn
• Tax-free personal allowance 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 on premium-class tickets and on private jets
• National Minimum Wage to rise in April 2018 by 4.4% from £7.50/hour to £7.83/hour
Pensions, savings and welfare
• £1.5bn package to ‘address concerns’ about the delivery of universal credit
• 7-day initial waiting period for processing of claims to be scrapped
• Claimants to get one month’s payment within 5 days of applying
• Repayment period for advances to increase from 6 to 12 months
• New universal credit claimants in receipt of housing benefit to continue to receive it for 2 weeks
• VAT threshold for small business to remain at £85,000 for 2 years
• £500m invested in a range of initiatives, including 5G mobile networks, full 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 linked to CPI measure of inflation, not RPI
• Income tax to be applied from April 2019 on digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction, raising about £200m a year
• New package on tax avoidance forecast to raise £4.8bn by 2022/23
• All online marketplaces to be jointly liable for VAT together with their sellers to cut down on online VAT fraud
• £30m to develop digital skills distance learning courses
• Treasury to examine charges for single-use plastic items to help the environment
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
• No extra funding for nurses but Chancellor to provide additional funding for NHS pay if pay review body recommends an increase
• £40m teacher training fund for underperforming schools in England: worth £1,000 per teacher
• £20m to support further education colleges for T-Levels
• 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 at an expected cost of £177m
• £320m to be invested in former Redcar steelworks site
• Second devolution deal for the West Midlands
• £1.7bn transforming cities fund to deliver local transport priorities for 6 city regions with elected mayors
• £300m to HS2
• £2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive
• Scottish police and Scottish Fire & Rescue services to get refunds on VAT from April 2018.
• Government to abolish tolls on Severn Bridge as previously promised by the end of this year.
• Young person’s rail card extended to 26-30-year-olds, giving a third off rail fares
• 5 new locally-agreed garden towns to be started with public-private agreements.
• Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000
• In London and other expensive areas, the first £300,000 of the cost of a £500,000 property by 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
• Long-term goal to build 300,000 new homes a year by the mid-2020s
• £44bn in government support, including capital funding and loans guarantees, to support housing market
• £34m to develop construction skills across the country
• Councils to charge 100% council tax premium on empty properties
• Compulsory purchase of land banked by developers for financial reasons
• Urgent review into delays in permitted developments going forward
• Focus on urban areas e.g. city centres and major transport hubs for house building and continue to protect green belt
• Homes & Communities Agency to be expanded to Homes England to facilitate delivery of new homes where needed
• £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 rise by 2% above Retail Price Index (RPI) inflation
• Minimum excise duty on cigarettes and hand-rolled tobacco, introduced in March, will also rise
• Duty on beer, wine, spirits and most ciders will be frozen
• Duty on high-strength ‘white ciders’ to be increased via new legislation
• From April 2018, Vehicle Excise Duty for diesel cars that do not meet latest emissions targets will rise by one band in April 2018
• Tax rise will not apply to van, lorries or goods vehicles
• Existing diesel supplement in company car tax to rise by 1%
• Proceeds to fund a new £220m clean air fund
• Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped