Autumn Statement 2016
On 23 November 2016, Chancellor of the Exchequer Philip Hammond delivered his first Autumn Statement since his appointment in the summer.
The Chancellor made reference to the EU referendum in that with Britain having the fastest growing major economy this year, it has “confounded commentators at home and abroad with its strength and resilience”. He also said that the UK needs to be “match fit” as we prepare to leave the EU.
A lot of the measures already forecast were duly announced, and there was little in the way of surprises. One however was the announcement that while this was the Chancellor’s first Autumn Statement, it would also be his last! More about the announcement can be found later in this article.
Below is our summary of the key points from the Chancellor’s Statement.
Tax and National Insurance (NI)
The income tax personal allowance will rise from £11,000 to £11,500 in 2017/18 and is expected to rise to £12,500 by 2020/21.
The higher rate (40%) tax threshold will rise in 2017/18 to £45,000 and the Chancellor said that by the end of this Parliament the aim is that this level will rise to £50,000.
Corporation Tax is cut to 17%, the “lowest rate of corporation tax in the G20”.
Insurance Premium Tax will rise from 10% to 12% from June 2017.
Big news was the changes (cuts) to salary sacrifice arrangements. Childcare, cycle to work schemes and low emission cars are excluded from these plans, however many other benefits will no longer qualify from tax breaks.
We welcome the announcement that for salary sacrifice schemes in place before April 2017, the changes will not come into force for another year. This allows employers time to assess and plan for the future. We also welcome the news that salary sacrifice for cars, school fees and accommodation will remain untouched until April 2021. On the flip side, it’s disappointing that some wellbeing benefits such as health checks are included in the salary sacrifice cuts.
Overall it is expected that these changes to salary sacrifice will raise over £1bn in additional tax.
Tax at the pumps was frozen, with fuel duty remaining the same (or an increase in duty “cancelled” as it was announced) for the 7th consecutive year.
On National Insurance, employee and employer thresholds will be aligned at £157 per week.
The Chancellor promised that the government will aim to tackle pension scams, and this includes a ban on cold calling.
The Money Purchase Annual Allowance was cut from £10,000 to £4,000 with effect from April 2017. A consultation has been launched around this, details of which can be seen here.
Employment and welfare
The National Living Wage will increase by from £7.20 to £7.50 per hour, equivalent to £500 per year for a full-time worker.
Tax-free childcare is to be rolled out in early 2017, delivering “a saving of up to £2,000 per child”.
Universal Credit taper rate will fall by 2% to 63%.
The Chancellor said that “For too many, the goal of home ownership remains out of reach”. He therefore promised a new housing infrastructure fund of £2.3bn, delivering 100,000 new homes in high demand regions.
A further £1.4bn is to be provided to deliver more affordable homes.
A ban on letting fees to people renting properties was promised “as soon as possible”
Hammond’s first and last Autumn Statement
A big announcement was that while this was the Chancellor’s first Autumn Statement, it would also be his last. He commented “I will not make significant changes twice a year, just for the sake of it” and explained that we are the only advanced major economy to make large changes to the tax system twice a year.
In the future, an Autumn Budget will be delivered, with a new Spring Statement being used to make minor adjustments that the Chancellor feels are needed.
We welcome the move to an Autumn Budget, which will give businesses more time to plan well in advance of the new tax year start.
Should you wish to discuss anything from the Autumn Statement, please contact your usual CWB planner, or email firstname.lastname@example.org.