On Wednesday 22 November, Chancellor Phillip Hammond delivered the 2017 Autumn Budget. The main highlights include changes to stamp duty for first-time buyers, updates on the economy, and increased investment into technology. We have pulled together a high-level summary below:
Stamp duty to be abolished for first-time buyers
To stimulate the housing market, first-time buyers purchasing a property with a value up to £300,000 will no longer need to pay stamp duty. In pricier areas such as London, the first £300,000 will be exempt on properties worth £500,000 – first-time buyers would only pay the stamp duty on the remaining property value. This change will come into effect immediately in England, Wales and Northern Ireland, and Scotland will then need to decide whether to apply the same approach.
Land development and empty properties
Although the government has committed £44bn in capital funding to support the UK housing market, property investors and developers beware! Councils have been given new powers to charge 100% council tax on empty properties. Plus, there will be a compulsory purchase of any land banked by developers for financial reasons. However, small building firms should get a £1.5bn share of the annual target for delivering 300,000 new homes. £400m has been set aside to regenerate housing estates, as well as £1.1bn to “unlock strategic sites” for development. The government are looking to:
“…support more housebuilding, raising housing supply by the end of this Parliament to its highest level since 1970, to make homes more affordable in the long term
and help those who aspire to homeownership”
UK economy and employment
Although GDP growth has remained fairly solid, it has slowed, so an overall gloomy outlook was given by the Chancellor with regards to productivity – the growth forecast was downgraded to 1.5% from 2%. To prepare for the UK leaving the EU, £3bn has been set aside, and it is hoped this money will alleviate any potential problematic outcomes. However, on a brighter note, the government have forecast that an extra 600,000 people will be in work by 2022, with employment having risen to a near-record high by 3 million since 2010.
Business – VAT, technology and training
The VAT threshold has risen to £85,000 and it will stay at this level for the next two years. Rises to business rates will now be pegged to the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI), resulting in a cut of £2.3bn. These measures have been designed to ease the pressure on growing businesses. The government will be investing £500m into full-fibre broadband, 5G mobile networks and artificial intelligence, as well as £540m into electric cars to support this growth area (this will include things like creating more charging points). Along with increased investment into R&D (£2.3bn) to expand the National Productivity Investment Fund (NPIF), this move is designed to “establish the UK as a world leader in new technologies”. What’s more, the government are seeking to create a National Retraining Scheme in areas such as science, technology and engineering.
Changes to Personal Tax, the Living Wage and Welfare
The higher-rate tax threshold has risen to £46,350 and the tax-free personal allowance on has risen from £11,500 to £11,800. The National Living Wage is set to rise in April 2018 to £7.83 (currently £7.50). The controversial Universal Credit system has been promised a £1.5bn package to “address concerns about the operation of the system”, which has been met with some disappointment.
Health and Pensions
The Chancellor announced there will be £2.8bn in extra funding for the NHS and promised £350m to ease looming winter pressures. Although there won’t be any extra funding for nurses, a capital investment fund of £10bn has been budgeted for hospitals (up to 2022).
Some pensioners will be better off, as there will be a 3% increase to pension credit. More well-off pensioners with additional private pensions may see a decent increase due to the reduction on income tax liabilities. If you need a pension review, please speak to our financial planning team for advice.
For more information, The Guardian has an excellent article with comparisons for different scenarios – read more.
Other budget announcements
• The fuel duty rise set for April 2018 has been scrapped, but there will be a one-off tax increase for new diesel cars that don’t meet emissions standards for the first year of road tax. Proceeds of the diesel tax will go towards a new clean air fund. The company car tax diesel supplement has been increased by 1% (3% – 4%). From April 2018, fuel benefit charges and van benefit charges will increase in line with the Retail Prices Index (RPI).
• Education will see £40m invested in underperforming schools in England, as well as the recruitment of 8,000 new computer science teachers (£84m).
• Tobacco will rise by 2% above inflation (RPI), i.e. an extra 28p per pack of 20 cigarettes, but duty on alcohol (beer, wine, ciders and spirits) will be frozen (duty on high-strength ‘white ciders’ will be subject to new legislation in 2019).
Please see the Autumn Budget – Executive Summary for more information.