An unusually jovial Chancellor delivered his first Autumn Budget with restless backbenchers behind him, waiting to hear proposals on how their party intended to win back young voters lost to Labour during the election and listening for some positive words on Brexit.
They were soon rewarded as Philip Hammond began his speech looking forward to a future full of change and opportunities, with a further £3bn put aside over the next two years to prepare for Brexit, in addition to the £700m already invested.
After revealing some gloomy forecast revisions from the Office for Budget Responsibility, with growth now expected to be below 2% for the next five years and productivity and business investment similarly revised down, a forecast which did go up related to employment. Another 600,000 people are expected to be in work by 2022.
The main focus of the speech began to emerge as housing and stamp duty changes were announced.
Stamp duty has been abolished with immediate effect for all first time buyer purchases up to £300,000. 95% of all first-time buyers will benefit. £44bn of Government money was committed to ensuring 300,000 net additional homes are delivered, on average per year, by the mid-2020s, supported by action to regenerate housing estates and unlock strategic sites for development.
Tax and duty
- The personal allowance will be increased to £11,850 in 2018/19.
- The higher rate tax threshold will rise to £46,350 in 2018/19.
- The ISA annual limit will remain at £20,000 for 2018/19.
- The National Living Wage will rise to £7.83 an hour from April 2018.
- The VAT registration threshold will remain fixed at £85,000 for two years from April 2018.
- Fuel duty will remain frozen for an eighth year.
- Duty on beer, cider, wine and spirits will be frozen, but a new duty on high strength white ciders is planned for 2019.
- An extra 28p on a packet of 20 cigarettes. Other tobacco products also saw an increase in duty.
A further £155m is going to be invested in HMRC by the Government, to help bring in £2.3bn of additional tax by:
- HMRC tackling the hidden economy with new technology.
- Pursuing those engaged in marketed tax avoidance schemes.
- Enforcing the new Corporate Criminal Offence.
- Increasing efforts to address non-compliance among mid-sized businesses and wealthy individuals.
- Launching a new taskforce to specifically recover tax debts more than 9 months old.
Avoidance and evasion
Numerous measures were announced concerning online VAT fraud, with the Government expressing a desire for digital platforms to play a wider role in ensuring compliance amongst their users. A call for evidence in spring 2018 will see the Government explore what more digital platforms can do to prevent non-compliance.
Assessment time limits for non-deliberate offshore tax non-compliance will be extended so HMRC can always assess at least 12 years of back taxes without the need to establish deliberate non-compliance, following a consultation in spring 2018. This is particularly topical with HMRC already receiving and processing the first exchanges of financial information under the Common Reporting Standard.
Other headline measures announced included:
- Changes to universal credit which will reduce the current six week wait down to five weeks for most claimants.
- Increases to business rates will be based on the more favourable consumer price index, rather than the retail price index, from 1 April 2018.
- An increase in the rate of R&D expenditure credit from 11% to 12% from 1 January 2018. A new Advanced Clearance Service for R&D claims will also be introduced.
At one point during his speech, the Chancellor joked that he knows how to ‘show the nation a good time’. Whether this Budget induces such fun remains to be seen.
Author: Guy Smith, Head of Technical Research