Philip Hammond’s first Autumn Budget started with a sequence of humorous statements, including referring to Theresa May’s coughing pout at the Conservative Conference. However, he soon got down to business and delivered his hour-long Budget speech, announcing changes that will impact on contractors, freelancers and small businesses. Here is our summary.
UK employment, economic growth and borrowing
Philip Hammond started his speech referring to the strong position of UK employment. Unemployment currently stands at 4.3%, the lowest it has been since 1975. The high level of employment has been bolstered by full time workers. However, the rise in the number of people who are choosing to become self-employed is also supporting the economy.
The Office for Budget Responsibility (OBR) has reduced its forecast for UK economic growth. In March 2017, the OBR forecasted a 2% growth rate. This has been reduced to 1.5%. The growth rate for subsequent years has also been downgraded to:
- 1.4% in 2018
- 1.3% for 2019 and 2020
It will pick again in 2021 and 2022.
The UK national debt remains high at £1.7 trillion, equating to £67,000 per household, but borrowing is down by £8.4 billion to £49.9 billion, compared to forecasts from the Spring Budget.
Borrowing has been forecasted to fall further from £39.5 billion to £25.6 billion in 2022-23. This will be the lowest level for 20 years.
The change to business rates from the retail prices index (RPI) to consumer prices index has been accelerated by two years, to 2018. Philip Hammond announced, “this move is worth £2.3 billion to businesses over the next five years.”
Further revaluations will take place every three years instead of every five years, starting after the next revaluation which is set for 2022.
The fuel duty in 2018 will remain frozen. This is the eighth year in a row it will remain unchanged. On average, drivers can save up to £160 per year.
There were rumours to a change in Stamp Duty Land Tax (SDLT) prior to the Budget. In the announcement The Chancellor announced that this tax will be reduced to zero for first-time buyers, when they purchase property under £300,000.
If properties are purchased, up to the value of £500,000 the first 300,000 will be free from SDLT.
This move will be welcome as young people still struggle to get onto the property ladder.
There were numerous rumours circulating that the Chancellor would announce plans to extend the IR35 reforms into the private sector.
Instead, he used the Budget speech to quietly announce that a consultation will take place next year into whether to extend the forms. The consultation will be based on the experience of the public reforms.
National living wage and minimum wage
From April 2018, the National Living Wage will increase by 4.4% from £7.50 to £7.83 per hour. This will benefit around two million people and means a full-time worker can expect to see an extra £600 in their pay packet.
Summary of minimum wage
|21-24 years||18-20 years||16-17 years||Apprentices|
|£7.38 p/h||£5.90 p/h||£4.20 p/h||£3.70 p/h|
From April 2018, the personal allowance will increase from £11,500 to £11,850. The higher rate threshold will increase to £46,350 up from £45,000.
Railcard for those aged 26-30
From spring 2018 a new railcard offering cut price rail fares will be available for those aged between 26-30 years.
The Chancellor has promised to put £1.7 billion towards improving the nations transport links. In summary:
- an extra £337 million will be given to bring a new fleet of trains on the Tyne & Wear Metro
- an extra £6 million will be given to the Midlands Connect motorway and rail projects
- transport links on the Cambridge – Milton Keynes – Oxford route will be improved
The threshold at which businesses must pay VAT remains at £85,000. This comes as a surprise as it was wildly rumoured that the threshold would be reduced to bring it in line with other European countries.
The £85,000 threshold will remain in place for the next two years.