The Autumn Statement announcment was delivered with the usual positive tone and promises of a brighter future for the UK. It was, however, the usual mixed bag of new measures; some good, some not so good, for UK contractors, freelancers and small businesses. Read our summary here.
The last Autumn Statement
It turns out, the first change the Chancellor has on the cards is to abolish the Autumn Statement! Instead there will be a Spring Statement and the Budget will be presented in autumn, as from next year.
This is to allow more time to scrutinise the Budget ahead of time.
UK economy, GDP and debt forecasts
A key part of the Autumn Statement address, as expected, was to look at the new forecasts for economic performance, GDP and continuing to close the deficit gap.
Source: Office for Budget Responsibility (OBR)
The objectives set by former Chancellor, George Osborne to produce a surplus by 2020, have been sidelined. Instead, Mr Hammond plans to focus on supporting the economy through the up-and-coming changes related to leaving the EU.
This chart shows that in 2021 there will still be a financial deficit, although it will be the lowest still for two decades.
Mr Hammond communicated he is still committed to return the UK finances to balance, when practically possible.
Source: Office for Budget Responsibility (OBR)
This chart shows that 2017 could be a difficult year for the UK economy due to weak consumer demand and lower investment. After this, growth is predicted again, and a final GDP similar to that forecast in the March 2016 Budget.
NEW MEASURES: Investment in increasing productivity
Raising the bar in regards to productivity will be key to achieving these forecast results, as currently the UK lags behind other countries such as US, France and Germany.
A £23billion investment has now promised by the Chancellor, as part of a five-year plan to dramatically improve innovation and infrastructure. This includes an allocation of £390million to develop transport technology, such as driverless cars, hydrogen buses, and other eco-friendly means of transport.
In addition, along the same thread, an investment of £1billion has been made for digital infrastructure. This will improve the speed and reliability of communications and path the way to be a global leader in 5G technologies.
A five-year plan to give business rate relief on new fibre infrastructure has also been honoured.
NEW MEASURES: PROPERTY & HOUSING
One of the biggest weaknesses of the UK is the inability for young people to get onto the property ladder. Following he same track as the former Chancellor, more is being done to help the housing “crisis”.
- 100,000 new homes to be built from a £2.3billion investment
- 40,000 affordable homes to be built from a £1.4billion investment
- 90,000 new affordable homes will be built in London, from a £3.15billion investment
- There will be a relaxation of government grants to assist with building
- Housing association tenants will have more options regarding Right-to-Buy
- Fees for rental tenants will be abolished
- The government are pledging to double capital spending during their government
NEW MEASURES: TAX RATES & RELIEFS
There is good and bad news regarding tax legislation:
- Corporation tax will be reduced to 17 percent – making it the lowest rate in the G20
- The tax-free personal allowance will increase to £12,500 by 2020
- The limit where higher-rate tax applies will increase to £50,000 by 2020
- Tax avoidance measures will be taken further
- Lower business rates relief cap
- Insurance Premium Tax will rise from 10 percent to 12 percent from June 2017
- Tax breaks regarding Employee Shareholder Status will be removed
- There will be another set of planned tax measures over the forecast period, to raise an extra £2billion.
NEW MEASURES: Changes to Employee Benefits
The popularity of Salary Sacrifice Schemes has caused the government to rethink. Subsequently, employee benefits will be taxed the same as cash income.
Pensions, childcare and the cycle to work scheme will still offer some tax breaks for employees, as will low-emission cars. Any arrangements that are in place before April 2017 will be protected for up to one year. School fees, cars and accommodation will be protected for up to four years.
New Measures: Helping Businesses
An investment of £400million will be allocated for venture capital funds. This is expected to unlock £1billion of funds for new business start-ups.
Improving management skills is also on the radar, with additional funding promised to enhance business leadership.
Mr Hammond’s vision of an “economy that works for everyone” will heavily rely on business success.
“My priority as chancellor is to ensure Britain remains the number one destination for business.” Mr Hammond
New Measures: Personal Finance
Credit interest has been dwindling to next to nothing for those with savings income. Next year, a new maximum £3,000 Savings Bond will be marketed with NS&I, providing a three-year plan of 2.2 percent interest. The Budget will reveal more in the spring.
Motorists continue to save £130 per year, as fuel duty has again been cancelled, for the seventh consecutive year.
Working families should benefit next year from tax-free childcare – on it’s way in 2017 to ensure working families are rewarded.
Contractors face uncertain times
Announcements in this Autumn Statement could affect the way, in which contractors are taxed, particularly those in the public sector.
Contractors, freelancers and small business owners talk to AJN Accountants to help them save tax and time.