Posted on: 23 November 2016
The Chancellor of the Exchequer, Philip Hammond, has delivered his first Autumn Statement setting out the UK Government’s spending plans – it will also be his last. Starting in autumn 2017, there will be an Autumn Budget, announcing tax changes well in advance of the start of the tax year. From 2018 there will be a Spring Statement, responding to the forecast from the Office for Budget Responsibility (OBR), but no major fiscal event. If unexpected changes in the economy require it, announcements will be included in the Spring Statement.
This year has certainly been a long time in politics – what does it all mean for you?
The UK economy is forecast to be the fastest growing major economy in 2016, but the OBR has forecast growth to slow and inflation to rise over the next two years. Growth remains positive and employment should continue to rise in each of the next 5 years, with half a million more people forecast to be in work by 2021.
New savings bond
NS&I will offer a new three-year Investment Bond with an indicative rate of 2.2% from spring 2017. The bond will offer the flexibility to put away between £100 and £3,000 and be available to those aged 16 or over.
The lowest tax threshold rate will increase to £12,500 and higher rate to £50,000 by the end of parliament in 2020/21. Personal Allowance is currently £11,000 this year, and will rise to £11,500 in 2017-18. The higher rate of income tax will increase from £43,000 this year to £45,000 in 2017-18.
Money purchase annual allowance
The Money Purchase Annual Allowance (MPAA) – the annual amount individuals can contribute to defined contribution pensions after having previously accessed a pension flexibly – will be almost halved from £10,000 to £4,000. The Chancellor said the decision was taken to prevent inappropriate double tax relief and will come in to force in April 2017.
Ban for lettings agents fees
Letting agents will no longer be able to charge renters fees, e.g. when they sign a new tenancy agreement.
Insurance Premium Tax
Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.
Stimulating growth by investing in infrastructure and innovation to improve long-term productivity
The Chancellor reported that raising productivity is essential to growth and, to illustrate the fact, the UK’s productivity levels lag the US, France and Italy. A new National Productivity Investment Fund will provide £23 billion of additional spending in transport, digital communications, research and development and housing.
There is very little in today’s announcement to alter our positioning for client portfolios. We will examine the details of these announcements to determine the areas our clients need to consider.
If you have any questions for Omar Iqbal in our Financial Planning Team about the Autumn Statement, please do not hesitate to get in touch.
All data has been compiled by Duncan Lawrie from sources believed to be reliable. Full details of sources are available on request.
The comments and figures in this document are generally applicable but you should always take specific advice to suit your individual circumstances before taking any action. Errors and omissions excepted.
The value of investments and income generated may fall as well as rise, and investors may not get back the amount invested. Past performance is not a reliable indicator of future results.