“A Budget for hard-working families…”
Philip Hammond, the Chancellor of the Exchequer, delivered a Budget which he declared “shows the British people that their hard work is paying off”. Mr Hammond was under intense pressure to loosen the purse strings. He did announce several new cash injections, while suggesting that “the era of austerity is finally coming to an end”.
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Brexit Personal Taxation, Wages and Pensions On the personal taxation front, the Chancellor announced that the personal allowance threshold is set to rise from £11,850 to £12,500 in April 2019, while the higher rate income tax threshold will increase from £46,350 to £50,000. This move was being introduced a year earlier than originally planned, a situation which Mr Hammond said was possible due to the improving state of government finances. In addition, the Chancellor announced that the two tax thresholds would subsequently rise in line with inflation (CPI).
The lifetime allowance for pension savings will increase in line with CPI for 2019/20, rising to £1,055,000. The ISA subscription limit for 2019/20 will remain unchanged at £20,000 and JISAs will be uprated in line with CPI to £4,368. The government is set to publish a consultation next year for maturing Child Trust Fund accounts and on the taxation of trusts.
Mr Hammond also said that the National Living Wage is set to increase by 4.9%, from £7.83 to £8.21 an hour, from April 2019, and that work allowances for Universal Credit were to be increased by £1,000 per annum, a move which would see 2.4 million working families with children, £630 a year better off.
The Chancellor also announced a freeze in fuel duty for the ninth successive year, and that beer, cider and spirits duties were also to be frozen. Wine duty is, however, set to rise in line with RPI inflation, while tobacco duty will continue to rise by RPI plus 2%.
In an effort to address pensions cold-calling, the government is publishing a response to its consultation and will shortly be implementing legislation to make it illegal.
The Department for Work and Pensions will consult later this year on supporting the launch of pensions dashboards, allowing people to view their pension pots, including their state pension, in one place. They also intend to publish a paper outlining the government’s approach to increasing pension participation among the self-employed.
Enterprise and Business The Budget Statement also included a number of measures to tackle the challenges facing business due to technological changes. This included plans to introduce a new 2% Digital Services Tax from April 2020, although Mr Hammond was at pains to stress that this would be carefully targeted and only levied on profitable companies that have at least £500m a year in global revenues, other criteria apply. The Chancellor also announced some relief for hard-pressed high street businesses, with business rates bills set to be cut by one third for firms with a rateable value below £51,000 over a two-year period from April 2019. This will benefit 90% of retail properties. Through the ‘Our Plan for the High Street’ initiative, a £675 million fund to support a sustainable transformation of high streets is pledged. He also announced that the Annual Investment Allowance was set to be temporarily increased from £200,000 to £1m for two years in order to stimulate business investment.
Another key announcement related to the Private Finance Initiative (PFI), with the Chancellor saying there was compelling evidence that such contracts do not deliver value for taxpayers or genuinely transfer risk to the private sector. He therefore stated that all future PFI contracts are to be abolished although he did stress that the government will honour existing contracts.
The government welcomes the FCA’s plans to expand access to the Financial Ombudsman Service (FOS) to small and medium sized enterprises, along with its consultation on increasing the FOS award limit to £350,000.
Housing During his speech, the Chancellor noted that the number of first-time buyers is currently at an 11-year high. He then announced that he will be extending the exemption of stamp duty for all first-time buyers purchasing shared equity homes up to a value of £500,000, and that this measure will be retrospective, thus benefiting first-time buyers who have made a purchase since the last Budget on 22 November 2017. The Chancellor also announced plans to add £500m to the £5bn Housing Infrastructure Fund that was designed to help get a further 650,000 homes built, along with new housing association partnerships in England that would deliver a further 13,000 homes. From April 2021, a new Help to Buy Equity Loan scheme will run for two years, available to first-time buyers only and for homes with a market value up to a regional property price cap.
Closing Comments Philip Hammond closed his Budget Speech with these words: Other key points • Confirmed an extra £20.5bn for the NHS over the next five years Paul Beasley ACII Chief Executive Officer |