Pressure? What pressure?
Press reports tell us that Philip Hammond is under attack from those within his party who believe he is not sufficiently enthusiastic about Brexit. He had to cope with downgraded predictions of economic growth and poor statistics on productivity, while seeking to address some of the issues which appear to have hurt the Government in this year’s general election – housing, austerity, the difficulties facing claimants of Universal Credit, the constant need to find money for the NHS. For a man under such pressure, he managed to appear remarkably relaxed, making jokes with the Prime Minister about cough sweets (she handed him a packet) and managing to avoid the possible pitfalls of talking about the advantages of driverless cars.
In common with most recent Budget speeches, Mr Hammond addressed the House for almost exactly an hour. In other respects it was unusual: there was very little in the speech about tax, and almost nothing about raising it. He listed spending promises and tax giveaways, such as the headline relief from Stamp Duty Land Tax for first-time buyers, but it was hard to detect anything that would pay for it all.
That, of course, is hidden in the mass of documentation that is released on the Government’s website the moment the Chancellor sits down. This booklet explains the main tax changes that were announced and outlines their impact on taxpayers. As usual, some measures come into effect straight away, some take effect next year, and some are advance warning of changes coming in 2019 or 2020. We have included reminders of important changes happening in April 2018 even if they were announced earlier and not mentioned in this Budget – it can be hard to keep track of what is happening when.
Probably Mr Hammond’s most pressing need was to avoid a repeat of the climbdown forced upon him after the March 2017 Budget, when he tried to introduce an increase in National Insurance Contributions, but had to accept that this was contrary to a Conservative election manifesto promise. So far, nothing seems to be as controversial as that. The measures that will raise tax are either hard to argue with (cracking down on avoidance and evasion) or relatively obscure (changing the way companies calculate capital gains).
A Chancellor’s decisions often have an effect on employment – in this case, possibly on Mr Hammond’s continuing tenure in his job. Whether or not the Chancellor is judged to have steered the economy in the right direction, we will be happy to discuss the impact of his proposals on you and your finances.
Significant points
- From 22 November 2017, Stamp Duty Land Tax (SDLT) is abolished for firsttime buyers on homes costing up to £300,000; no SDLT on first £300,000 of first-time buyer’s purchase of homes costing up to £500,000.
- Indexation allowance, which gives companies relief for the effect of inflation on capital gains, will be frozen at January 2018 for disposals after that date.
- The rate of the Research and Development Expenditure Credit increases from 11% to 12% with effect from 1 January 2018.
- Tax-free personal allowance rises from £11,500 to £11,850; threshold for 40% tax rises from £45,000 to £46,350. Tax rates and thresholds for Scottish taxpayers are to be confirmed by the Scottish Parliament in December.
- Abolition of Class 2 National Insurance and reform of Class 4 NIC for self employed is deferred by a year to April 2019 in order to assess impact on contributory benefits.
- Freezing of VAT registration threshold at £85,000 for two years instead of normal £2,000 increase, so speculation about a possible reduction in the threshold was unfounded.
- Capital Gains Tax annual exempt amount rises from £11,300 to £11,700.