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The Autumn Budget 2017: What did the red box reveal?

Yesterday, Philip Hammond delivered his second Budget of 2017, the Autumn Budget. This follows the move to one major fiscal event each year, announced last November.

After the snap general election, many had anticipated major changes and brave decision-making. Though Hammond affirmed widespread investment, despite the country’s debt peaking this year, other radical announcements were few and far between.
He began with Brexit, promising to make ‘the pursuit of progress’ a priority in the coming weeks. Hammond pledged to support families struggling with the cost of living and asserted his intention to make Britain a prosperous and inclusive country that is ‘fit for the future’. Here we round up the Chancellor’s principal promises and what they mean for you:

Income Tax & Wages

Appearing to defend his intention to shape a fairer economy for all and building on the increases announced back in March, from April 2018 the tax-free personal allowance will increase from £11,500 to £11,850 and the higher-rate band from £45,000 to £46,350. This represents a £410 reduction in the amount of tax paid by a higher-rate taxpayer in 2018-19.
For most, the increase is insufficient considering employees pensions contributions are also set to increase next April. The upshot of this is that many will still be out of pocket unless they also receive a pay rise. However, some higher-rate taxpayer’s will find themselves paying less income tax as they move out of the higher rate tax bracket and into the basic rate tax bracket.
The National Living Wage, for over 25’s, will increase from £7.50 to £7.83 per hour from April 2018 and is expected to deliver a wage increase for around two million people. The National Minimum Wage – applied to under 25s – will also increase from £7.05 to £7.38 per hour, 18- to 20-year-olds will receive a 30p boost to £5.90 per hour and for 16- and 17-year-olds the minimum will rise by 15p to £4.20 per hour. Apprentices will see an increase of 20p to £3.70 per hour.
These increases are likely to have a disproportionate impact on employment costs for SMEs, with the upfront costs associated with operating a business already on the up.

Diesel cars

Drivers of diesel cars took a hit in the Autumn Budget as Hammond pledged to increase the cost of driving those vehicles most harmful to the environment.
The first year VED rate for diesel cars, that do not meet the latest standards, will go up by one band from April 2018. This will go towards subsidising a £220m clean air fund. However, this will only apply to cars and not to vans or commercial vehicles. Hammond also revealed that the existing diesel supplement in company car tax will increase by one percentage point.
Though drivers of diesel vehicles are left with a bit of a conundrum on their hands, all drivers will benefit from a freeze on fuel duty.

Business rates

The business rates fiasco began earlier this year when thousands of businesses were left facing bigger bills following the most recent revaluation. In the Spring Budget, Hammond announced a £9bn relief package to aid those worst affected. Unfortunately, this didn’t quite work as anticipated with long delays leaving many businesses questioning their futures.
Now, in an attempt to prove to SME’s that they truly are the ‘backbone’ of our economy and provide them with a much-needed boost, the Chancellor has brought forward the switch from the retail price index (RPI) to the consumer price index (CPI) by two years. In addition, he has confirmed that revaluations will take place every three years instead of every five years. In the long run, these are both measures which will save small businesses money.

VAT registration threshold

Rumours circulating prior to the Chancellor’s speech hinted at a reduction to the VAT threshold, in line with European standards. Instead, the threshold will be frozen at £85,000 for the next two years. This means many businesses can breathe a sigh of relief as they will remain out of the system until at least 2020.
The Government will consult further on how the VAT system could be changed to ‘facilitate better incentive’ and encourage business growth.

Stamp Duty

Aimed at winning over millennials, Hammond concluded with a pledge to scrap Stamp Duty Land Tax (SDLT) for first-time buyers. They will no longer pay SDLT on purchases up to £300,000 or on the first £300,000 for purchases worth up to £500,000.

HMRC estimate that this will exempt up to 80% of first-time buyers from paying the tax. However, the Office for Budget Responsibility has predicted that the scrap could cause house prices to rise and hence any savings will be undermined. Though a step in the right direction, this move is unlikely to fundamentally change the housing market.

At George Hay we provide professional and proactive tax advice, as well as a wide range of other advisory services, to businesses of all sizes and individuals. If you’re concerned about any of the announcements in the Autumn Budget, or have questions about how they might affect you or your business, please do contact us.

The George Hay Autumn 2017 Budget Summary, written by our experts, can be found here.

You can find the Autumn Budget in it’s entirety on the HMRC website, here.

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