by David Kingham
The new Chancellor, Philip Hammond, today delivered his Autumn Statement. He confirmed that there will now be a period of economic uncertainty as the UK negotiates its departure from the EU. In view of uncertainty the government confirmed they cannot deliver a surplus in 2019/20 but still want to balance the deficit as soon as practicable while leaving enough flexibility to support the economy in short term.
The speech projected a commitment to dealing with the deficit, whilst recognising the need for investment in order to drive productivity in the UK, for once containing only relatively minor changes in taxation, largely relating to tax rates and thresholds, reliefs and anti-avoidance.
A summary of key announcements is as follows:–
Taxation
Personal taxes
Income tax: next year the personal allowance will rise to £11,500 and the higher rate threshold to £45,000 (and to £12,500 / £50,000 respectively by the end of this Parliament.)
National Insurance: both employees and employers will start paying National Insurance on weekly earnings above £157 to simplify payment of National Insurance for employers.
Salary sacrifice: the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017 except for arrangements relating to pensions, childcare, cycle to work and ultra-low emission cars. This will mean that employees who swap salary for benefits will pay the same in tax as the majority of individuals who buy them out of their post-tax income.
Valuation of benefits in kind: the government will consider how these are valued for tax purposes, publishing a consultation on employer-provided living accommodation and calling for evidence on valuation of all other benefits in kind at the 2017 Budget.
Non-domiciled individuals: from April 2017 inheritance tax will be charged on UK residential property where it is held indirectly by a non-domiciled individual through an offshore structure (e.g. a company or trust). This closes a loophole available that was available to non-domiciled individuals, and is to ensure that individuals who live in the UK and make use of public services pay their fair share of tax.
Savings: the Government will continue to support saving by increasing the ISA limit from £15,240 to £20,000 in April 2017.
Foreign pensions: the tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents to the same extent as domestic ones.
Business taxes
Corporation tax: this will be cut to 17% by 2020.
Business rates: the burden of business rates will be reduced by £6.7billion over the next 5 years.
Reform of loss relief: the amount of profit that can be offset by carried-forward losses will be restricted to 50% from April 2017 whilst allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. Also rural rate relief will double to 100% to remove the inconsistency between rural rate relief and business rate relief.
Tax avoidance
The Government will introduce a new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC.
Productivity
The Chancellor’s speech highlighted productivity as the central long-term challenge facing the UK, commenting that it takes German workers four days to produce what UK workers produce in five. The following areas were addressed:–
- Housing: a fund of £2.3 billion has been allocated to build up to 100,000 new homes. There will be an additional £1.4 billion to deliver an additional 40,000 affordable homes.
- Transport: £1.1 billion will be provided by 2021 to relieve congestion and upgrade local roads and public transport networks, with an extra £220 million invested into key pinch-points on key strategic roads.
- Digital communications: the Government will invest £1 billion into full-fibre connections and future 5G communications to bring faster and more reliable broadband to homes and businesses.
Other key policy announcements were as follows —
Energy: over the next 15 years, more than £100 billion of private investment is expected to provide cleaner generating capacity, upgrading to a smarter energy system and developing new resources.
Letting agent fees: there will be a ban on letting agents’ fees to tenants to give those renting property greater clarity and control over what they will pay.
National living wage: this will increase from £7.20 to £7.50 per hour from April 2017.
Universal credit: a taper rate will be introduced to let individuals keep more of what they earn and strengthen the incentive for individuals to progress in work.
NS&I Investment Bond: NS&I will offer a new 3-year savings bond at a rate of 2.2%.
Grammar schools: the government will provide £50 million of funding to support the expansion of existing grammar schools in each year from 2017/2018.
Disclaimer
The above is for information only and should not be taken as constituting legal or financial advice in any way.
Kate Walsgrove Solicitor
David Kingham Partner, Chartered Tax Adviser
Morrisons Solicitors LLP