George Osborne delivered his much anticipated autumn budget this afternoon as well as setting out public spending cuts for the rest of this parliament. Here is what our Trainee Tax Adviser Hayley Robertson thought about the announcements.
Following on from the massive shakeup delivered in the summer budget and the backlash George Osborne received on topics such as the tax credits, we always knew that this statement was going to contain certain step downs and developments. However, thanks to the decision to combine the Autumn Budget with the Governments ‘Comprehensive Spending Review’, which outlined the plan for the next five years, some of the issues that are most important to our clients seemed to get buried under the facts, figures and percentages.
I have dug a little deeper to give you my take on the autumn budget, highlighting the key changes and developments which may affect you, your family and your business.
Personal and Inheritance Tax
- Following on from the Chancellor’s restriction of mortgage interest relief for rental properties in July’s budget, he has yet again hit out at those with second homes or buy to let properties by introducing an additional 3% Stamp Duty Land Tax. This tax will apply to people buying property for these purposes.
Mr Osborne expects that this stamp duty will raise an additional £1bn for the economy and, while this will largely be raised from housing in London, it is still possible for property outside of the south to be caught by this charge.
- As previously discussed, the Chancellor is continuing with his plans to create a digital forum on which you will be able to have a “more convenient real time view” of your tax affairs.
This is all to do with the aim of bringing forward tax payments under self assessment closer to when your profits arose.
Mr Osborne announced plans for this system to be in place by 2019 so that he can enforce a maximum 30 day payment period for capital gains tax after completion of sale of a residential property.
- The personal allowance (the point at which you start paying 20% tax) will increase to £12,500 and the higher rate threshold (when you start paying 40% tax) to £50,000 by the end of the parliament.
- He has also legislated that going forward, the Personal allowance will always be the equivalent of 30 hours per week at national minimum wage.
- Savings limits and ISA levels will remain the same for the coming year after a period of increase.
There were very few large scale changes to inheritance tax and personal taxation in this statement in comparison to the summer budget.
- The state pension has risen to £119.30, and the new single tier pension is set at £155.25 for next year although pensionable age will continue to rise in line with life expectancy.
- In a partially unexpected move, the chancellor made a complete U-Turn, scrapping his plans for the removal of tax credits entirely. This means that, until the universal credit eventually phases out the tax credit system, they will remain untouched.
- Housing benefit payments and pension credits will no longer be paid to those who have been out of the country for more than one month.
- 30 hours of free childcare will be available for working parents of 3 and 4 year olds whose income is less than £100,000 per parent and at least the equivalent of 16 hours at the national living wage.
- The age cap on new tuition fee loans will be lifted from 2016-17 so they are available to everyone under the age of 60. Part-time maintenance loans will be reintroduced from 2018-19 to support the cost of living while studying.
- The government expects 150,000 part-time students could benefit each year by the end of the Parliament. For all STEM subjects, tuition loans will be extended to students wishing to do a second degree from 2017-18.
- Trainee nurses will no longer receive grants to study. These will instead be replaced with tuition loans. Apparently this will create a further 3,000 new training places
- Over 500 new free schools and University Technology Colleges will open by the end of the current parliament.
- The amount of rent that housing benefit will cover in the social sector is now capped to the relevant Housing Allowance. This means that housing benefit may no longer fully subsidise families to live in housing that those who do not receive the benefit, would not be able to afford.
- The housing budget has been doubled to £2 billion to deliver 400,000 “affordable” new homes. 135,000 of these will be under the help to buy shared ownership scheme.
- In a move reminiscent of the Thatcher era, a trial at 5 housing associations will allow tenants to buy their home.
Increased Powers of HM Revenue & Customs
- The chancellor announced new powers, more money and greater scope for the revenue to enquire into tax affairs of both individuals and businesses.
- Despite the massive cuts of 18% to HMRC’s central and local systems, £800 million is being invested into the “fight against tax evasion”.
- There is now a 60% penalty for those who are caught by the GAAR (General Anti Abuse Rule) and this, combined with changes to it’s procedure, will make it easier (and more profitable) for HMRC to target the marketed tax avoidance products.
- The government has published draft legislation which will mean that, where HMRC think that they hold all of the data it needs to calculate your tax liability, it can issue a legally enforceable demand for payment.
One of the chancellor’s key quotes to be taken from today will be “For we are the Builders”. Builders of business, infrastructure and even a “permanent pothole fund”
This statement certainly seemed to be one aimed towards businesses, with announcements directly affecting them and investment in more infrastructural support.
- Continuing with the recurring theme, Osborne committed to the basic rate of Corporation tax being lowered to 18% from the current rate of 20% (28% in 2010) by the end of the current Conservative government.
- From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
- Small businesses will continue to receive support for apprentices. An apprenticeship levy of 0.5% of the wage bill will only be paid by employers with a paybill of more than £3 million which means that less than 2% of UK employers will pay it.
- The government will meet its commitment to 75,000 Start Up Loans by the end of this Parliament.
- Small Business Rate relief will be extended in England for a further 12 months to April 2017.
- As Mr Osborne announced in July, the new compulsory Living Wage (a replacement for the National Minimum wage) must be paid to all those aged 25 and above from April 2016 of £7.20.
With no large increase in National Insurance Contributions levels planned, this ultimately means a double hit for employers who will also have an increased NIC bill to pay.
Investing in Farming, Science and engineering
- There will be a new £1.5 billion “Global Challenges” fund, which will help address problems by developing countries whilst increasing Britain’s ability for cutting edge research. However, no further elaboration for what this fund means was given.
- The British Business Bank will keep the £400 million of additional funding for Enterprise Capital Funds which it was promised last year.
- “Averaging” of farmers’ profits has been extended from two years to five years from April 2016. This will help with the impact of tax payments on the tax payer.
- There are 26 new or extended enterprise business parks across the country (9 in the north east), giving those who wish to take advantage of the benefits of the zones, more opportunity to do so.
- The government will provide an exemption for Energy Intensive Industries, including the steel industry. This will come from the costs of the Renewables Obligation and Feed-in Tariffs.
- £50m has been provided for two new agricultural technology centres, headquartered in York.
Other important points
- There will be the largest investment in the NHS since its creation, increasing the budget from currently £101 billion to £120 billion by 2020/21. This is in addition to the government finding £22bn in efficiency savings.
- Local councils will be free to levy a 2% additional charge on council tax which will be decided by an elected mayor. The money raised from this is strictly to be earmarked for adult social care projects.
- The chancellor has promised to donate the annual £15 million raised through the “tampon tax” to women’s charities.
- The Policing, heath, education, international aid and defence budgets are protected.
In comparison to the statement which he delivered in July, Mr Osborne’s autumn statement was rather bland. However, while it was not as radical as revamping the dividend regime or taking an axe to incorporations, some of the changes are fairly noteworthy.
There will no doubt be backlash over his stance on the NHS and nursing funding, his U-turn on tax credits and the limitation of housing benefit, but this will be countered by the announcements of the lowered deficit and rising employment.
Over the next few days we will be reviewing the full documentation in order to ascertain exactly what this budget will mean for you. If you would like any advice on the above announcements and what the potential impact is on you, please feel free to get in touch with us.