The Autumn Statement was not the most exciting from a tax perspective, but it was interesting for a number of reasons.
The Chancellor finished his first statement with an unexpected announcement; since the days of Gordon Brown there have been two showpiece performances, the March Budget, concentrating on tax, and the Autumn Statement, concentrating on spending. He has decided to switch the Budget to the autumn and make a Spring Statement, which will only involve a response to the Budget. You will therefore note that there will be two budgets in 2017!
The Chancellor has a difficult task, which I do not envy. Predictions of economic growth were down post Brexit, and borrowing up, therefore the aim to bring the public finances into balance has been delayed until the next Parliament. He also stressed that the level of uncertainty about the forecast figures is even higher than normal. We are assured, however, that by next autumn the process of Brexit will have begun and we may find that more radical policy changes are required to keep the public finances on track. We know how difficult it can be to predict our own business forecasts in terms of cash flow and profits so we can appreciate the difficulties of predicting the same on a much larger scale and with so many more uncertainties.
In summary, the key points of the Autumn Statement:
- From April 2017, the tax free personal allowance will be increased to £11,500 with confirmation that this will be raised to £12,500 by the end of this Parliament. The threshold for 40% tax will be £45,000 (again rising to £50,000).
- From April 2017, the employers and employees national insurance limits will be aligned at £157pw (not significant as they are currently only £1 apart!).
- Class 2 NIC will be abolished from April 2018. As some benefit entitlements are dependent on these contributions, self-employed people will need to consider how they will continue to qualify. This could be achieved through paying Class 4 NIC or voluntary Class 3 contributions, which are substantially more at present. Please put a note in your diary to review this if you are self-employed.
- Fuel duty will remain frozen for the seventh year.
- The National Living Wage will increase in April 2017 from £7.20 to £7.50.
- The new museums and galleries tax relief from April 2017 will be expanded to include permanent exhibitions alongside temporary and touring exhibitions.
- Corporation tax is still set to be reduced to 17% by 2020.
- Rural business rate relief will be increased to 100%.
- Employees and employers have been able to gain a tax advantage from different tax treatments of cash salary and benefits in kind. This involves replacing a cash salary with a benefit that is more advantageously taxed. However, from April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. Pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt.
- From 1 June 2017, the Insurance Premium Tax will increase by 2% to a 12% rate, the aim being to raise money to pay for spending measures announced. Whilst this is on all insurance, in an attempt to possibly balance this increase the Chancellor also announced an intention to crack down on fraudulent whiplash claims, which he suggested would reduce the average motorist’s premium by £40.
- Many businesses are registered under the VAT Flat Rate Scheme (FRS); most, I would suggest, because they are financially better off, and not so many because it is easier. The Government has decided that this constitutes ‘aggressive abuse’ and will try to negate it, by introducing from 1 April 2017, a new 16.5% VAT flat rate scheme for businesses with limited costs, such as many labour-only businesses.
In January 2017, the Government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.
The Government will be reviewing the wider economy and fiscal challenges and launching consultations in due course. We expect these to include:
- Making taxation fairer between business entities
- Valuation of benefits in kind
- Tax avoidance sanctions and deterrents
You can read a summary of the Autumn Statement here:
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