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2016 Autumn Statement: Summary points

by Scott Brown | Nov 23, 2016
  • On 23 November, Philip Hammond the Chancellor of the Exchequer announced the revised Budget for the 2017-18 financial year and beyond. This is his first budget and is the first statement since the Brexit referendum. It will also be the last Autumn Statement in the UK, with the Chancellor decreeing that in the future there will be only one statement a year.
    autumn-statement

    Economy

    • The UK is forecasted to be the fastest growing country in the G7 in 2016.
    • Forecasts predict there will be a 1.4% growth in 2017, followed by a recovery to 1.7% in 2018, 2.1% in 2019 and 2020, and finally 2% in 2021.
    • Debt is currently sitting at 84.20% of GDP for this year. The debt level will rise to 90.20% in 2017-18, before beginning to fall to 89.70% in 2018-19, 88% in 2019-20, 84.8% in 2020-21 and 81.60% in 2021-22.
    • Unemployment is at an 11-year low.
    • There are more people employed at present than any time since 2010.
    • Challenges lie ahead in the state of the economy with Brexit. There is a lot of uncertainty, which is likely to cause issues over the next 12 months.
    • The Brexit negotiations and sterling depreciation will lead to higher inflation and more than likely constrain business investment.
    • The UK productivity gap is 17% points lower than other G7 countries.
    • Deficit is projected to narrow to 5% of GDP in 2017, 4.2% in 2018, 3.4% in 2019 and 2.8% in 2020.
    • Public sector net borrowing is higher than was forecasted at Budget 2016 in every year and borrowing will stand at around £32 billion in 2020-2021.
    • Due to the pressure on public finances, the government has chosen to increase support on highly targeted investments, which will have a positive impact on the economy in the medium to long term future.
    • Government to invest over £1 billion by 2021, to support the market to roll out full fibre connections and 5G communications.

    Personal taxation

    • Tax receipts are estimated to be £15 billion lower by 2021.
    • Personal Allowance increased to £11,500 from 2017, rising to £12,500 by the end of parliament. The 40% tax threshold lifted to £45,000, and to £50,000 by the end of the current parliament, as previously promised.
    • There is a new Personal Allowance of £1,000 for trading income and or property income.
    • National minimum wage for those over 25 is set to increase from £7.20 to £7.50, estimated at an increase of £500 per year for full-time workers.
    • Non-domiciled individuals born in UK to non-domiciled parents no longer get non-dom tax treatment.
    • Permanent non-dom tax status has been abolished for those resident in the UK 15 of the last 20 tax years from April 2017. The new rules will raise £1.5bn for the Treasury.
    • From April 2017, non-domiciled individuals will attract Inheritance Tax on UK residential property when it is held within a company or a trust.
    • Landlords will now be responsible for absorbing letting agent’s fees, in place of prospective tenants.
    • Tax-free childcare will be gradually introduced from 2017.
    • Salary sacrifice to be limited from April 2017 and limited to pensions, childcare, cycle to work and ultra-low emission cars.
    • Government will introduce a new housing infrastructure fund of £2.3 billion by 2021. This should deliver up to 100,000 new homes.
    • Limitations have been put in place by the government, effective from April 2017, on tax-deductible expenses against any capital gains crystallised in an offshore fund.
    • Redundancy pay over £30,000 will be subject to employer’s NICs.

    Businesses and employers

    • Corporation Tax will be reduced to 17% by 2020, the lowest amongst the G20 nations
    • Business rates will be reduced by up to £6.7 billion over the next five years.
    • Employee and employers National Insurance threshold to be aligned at £157 per week.
    • There is now a new 100% business rates relief for full fibre infrastructure for a five-year period.
    • Tax relief for employees paying business expenses personally and being reimbursed (and receiving income tax relief) is subject to review in 2017.
    • Business investment relief will be reviewed from April 2017 for non-domiciled individuals who make use of the remittance basis when bringing offshore money into the UK for investment purposes.
    • From April 2017 restrict the amount of profit that can be offset against carried forward losses to 50%. This restriction is limited to a £5 million allowance for each stand-alone company.
    • The government will be reviewing bringing non-resident companies’ UK income into the corporation tax regime.
    • Flat rate VAT industry percentages will be abolished and replaced with a flat 16.50% rate from April 2017.
    • Government will review taxes on benefits in kind so as to reduce employers remunerating staff in methods other than salary.

    Pensions and investments

    • Government plans to crack down on pension scams and pension cold calling.
    • Those in flex-access drawdown will have their money purchase annual allowance reduced from £10,000 down to £4,000. This will enhance the value of existing capped drawdown arrangements and will affect many people’s retirement planning.
    • The government plans to align the tax treatment of foreign pension schemes with UK legislation. Details have not yet been released but this will affect the use of offshore pensions (QROPS) by UK residents, and those who people recently departed from the UK or are planning to leave.
    • Through the British Investment Bank, the government plans to invest £400 million to unlock £1 billion of investment in innovative firms looking to scale up. Through EIS and VCT structures we expect private investors to be able to participate in this investment boom.
    • The government plans to introduce a tax and regulatory framework for insurance-linked securities. These securities are a unique asset class with returns uncorrelated with the rest of the market and will provide a new investment opportunity for the private sector while enhancing the competitiveness of Lloyds of London.
    • The government plans to equalise the tax treatment of offshore reporting funds with those of UK base funds by removing the deductibility of management fees.

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