Wednesday, 23 November 2016 14:54

The Autumn Statement 2016 Commentary

The Chancellor has presented his first, and last, Autumn Statement. His closing announcement was that from 2017, the main fiscal Budget will be in the Autumn, well in advance of the new tax year, with a brief Spring Statement which will be a response to the OBR forecast rather than making significant fiscal changes. There will be a Budget in spring 2017, followed by a Finance Bill, followed by a second Budget in autumn 2017.


Background
The UK economy is forecast to be the fastest-growing major economy in 2016, but the Office for Budget Responsibility (OBR) has forecast growth to slow and inflation to rise over the next two years. The OBR growth forecast is:
2.1% growth in 2016
1.4% in 2017
1.7% in 2018
2.1% in 2019

The government has cut borrowing by nearly two-thirds since 2010, but will no longer aim for a budget surplus (where more tax is raised than is spent) by 2019. The Chancellor said that new fiscal targets are needed to provide the flexibility to support the economy and create space for more investment in roads, rail, research, and housing; the aim is for 2% underlying deficit and debt falling by 2020, and a balanced budget as soon as possible thereafter.

The main announcements:

➢ Fuel duty will remain frozen for a seventh year
In 2017, fuel duty will remain frozen for the seventh successive year, saving drivers £130 a year on average.

➢ Committing to raise the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21
The PA (the amount of income you can earn before you start paying income tax) is currently £11,000 (£11,500 in 2017-18). The point at which you pay the higher rate of income tax will increase from £43,000 this year, to £45,000 in 2017-18.
Once the PA reaches £12,500, it will increase in line with inflation as a minimum.

➢ National insurance thresholds
The employer and employee threshold will be aligned from April 2017, meaning that both employees and employers will start paying NI on weekly earnings above £157. Class 2 NICs will be abolished from April 2018, with self-employed NI being collected via Class 3 and Class 4 NICs.

➢ Investing in infrastructure and innovation to improve long-term productivity
• A new National Productivity Investment Fund will be established to provide £23 billion of additional spending. The National Productivity Investment Fund (NPIF) will provide major additional spending in areas that are key to boosting productivity: transport, digital communications, research and development (R&D), and housing.
• £2.3 billion for a new Housing Infrastructure Fund. The fund will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas where they are needed most. On top of that, £1.4 billion will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. Another £1.7 billion will be used to speed up the construction of new homes on public sector land.
• 390 million will go to future transport technology, including driverless cars, renewable fuels and energy efficient transport.
• A major new investment in transport infrastructure. There will also be a two-year 100% first-year allowance for companies who install electric charge points, coming in from today‎. This allows companies to deduct the cost of the charge-point from their pre-tax profits in that year‎.
• £450 million will also be spent on trialling railway digital signalling technology which will expand capacity and improve reliability.
• £1 billion to invest in full-fibre broadband and trialling 5G networks. Investment will support the private sector to roll out more full-fibre broadband by 2020-21. Funding will also support trials of 5G mobile communications.

➢ £2 billion more per year in research and development funding by 2020-21
A major increase in research and development funding for universities and businesses with R&D projects to help the UK remain an attractive place for businesses to invest in innovative research. This will back scientific research and development of technologies such as robotics, artificial intelligence and industrial biotechnology.

➢ Corporation tax to 17% by 2020
The main rate of corporation tax has already been cut from 28% in 2010 to 20%, and will be cut again to 17% by 2020, by far the lowest in the G20.

➢ Business tax – other changes

• Amendments to the Patent Box rules where there are cost-sharing arrangements
• Changes to certain aspects of partnership taxation to make profit allocation to partners more fairly calculated
• Technical changes to SEIS/EIS and VCTs, including:
• Changes regarding share conversion rights
• More flexibility for follow-on investments
• VCT share for share exchange changes
• Clarify and streamline the share option advance clearance process

➢ £400 million through the British Business Bank to invest in growing innovative firms
The funds will be invested in innovative small businesses with potential for growth, to provide the finance that they need to expand. This will support up to £1 billion of new investment.

➢ VAT Flat Rate Scheme (FRS)
It is proposed to introduce a new 16.5% VAT flat rate for businesses with “limited costs”. This will take effect from 1 April 2017.

➢ Employee shareholder shares

From 1 December 2016 no income tax or CGT exemption will be available on any shares acquired in consideration of an Employee Shareholder agreement entered into on or after that date.

➢ Tax avoidance
A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. Tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.

➢ Salary sacrifice schemes
From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income.

This will affect types of salary sacrifice schemes differently:
• pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt
• all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years

➢ Personal taxes – other changes
• Simplification of the PSA process for 2018/19 et seq
• Making good of benefits in kind must be by 6 July after the end of the tax year
• Employees will only be taxed on business assets for the period that the asset is made available for their private use

➢ Insurance Premium Tax will increase by 2% from 1 June 2017
Insurance Premium Tax (IPT) will increase from 10% to 12%. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers

➢ Non-domiciled individuals
There are several technical changes to the tax treatment of non-doms.

 

 

Blog

Latest News

On your e-bike
11/06/2019 - More...
The Cycling Minister, Michael Ellis, has

HMRC cancels penalties charged to 6,000 families
11/06/2019 - More...
The High Income Child Benefit Charge

HMRC blocks phone fraudsters
11/06/2019 - More...
Fraudsters have been blocked from using

Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login 

Ask a Question



Invalid Input
Your name

Please type your full name.
Your email address

Invalid email address.
Enter the text to submit your question
Enter the text to submit your question

Invalid Input



Contact Information

Banbury Office:

+44 (0) 1295 688 287
This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.


Birmingham Office:

+44 (0) 121 784 5818
This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.


Cirencester Office:

+44 (0) 1285 655 955
This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.


Leamington Spa Office:

+44 (0) 1926 431 143
This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.


We are registered under ICAEW and have PI Insurance.