The Chancellor, Philip Hammond rose to his feet at 12.38 to deliver his second Budget of the year.
The days leading up to the Budget have been dominated by talk of housing, Universal Credit and, most surprisingly, rail cards.
Mr Hammond started in a bullish and optimistic mood, saying: “I report today on an economy that continues to grow, continues to create more jobs and continues to confound those who seek to talk it down.” He then turned to Brexit, saying that the UK will be prepared for every possible outcome of the current negotiations.
As convention dictates, the Chancellor then moved on to the latest economic data and forecasts for the years to come.
The Chancellor confirmed that:
- Gross Domestic Product (GDP) has been substantially revised down, and is now predicted to grow by 1.5% in 2017, 1.4% in 2018, 1.3% in 2019 and 2020, 1.5% in 2021, 1.6% in 2022
- Inflation, as measured by the Consumer Prices Index (CPI), will peak at 3% in this quarter, while the Bank of England’s inflation target will remain at 2%
- Borrowing will continue to fall in years to come, to “reach its lowest level in 20 years” in 2022 / 23 when it will be £25.6 billion. This year, borrowing is predicted to be £49.9 billion; £8.4 billion lower than forecast in the Spring Budget
He then moved on to a raft of announcements.
Research and Development (R&D)
Mr Hammond said: “We are allocating a further £2.3 billion for investment in R&D (research and development) and we’ll increase the main R&D Tax Credit to 12%.”
The Chancellor said that a new tech business is founded in the UK every hour; he said he wanted that to be “every half hour.”
To help achieve that aim, Mr Hammond unveiled a range of measures, including a new public fund and an improvement in EIS (Enterprise Investment Schemes) tax-relief for investments made into ‘knowledge intensive’ companies.
It was announced that people who drive an electric car, and charge it at work, will not face benefit-in-kind tax charges. Furthermore, a £400 million charging infrastructure fund was also unveiled.
Older diesel cars will face higher road-tax. Although Mr Hammond was keen to point out that “no white van man or white van woman” will have to pay the increase.
Referencing the BBC’s Blue Planet programme, Mr Hammond announced that the Government will explore new taxes on plastic waste.
Mr Hammond announced measures to promote maths teaching in schools, including a £600 payment to schools and colleges for each child who studies A-Level or core maths.
Mr Hammond said that Universal Credit was a necessary and long-over due reform, where “work always pays and people are supported to earn.”
However, he went on to announce several key changes:
- The seven-day waiting period will end
- The system will change so that households can get an advance for a full months’ payment within five days
- People claiming an advance will now have 12 months to repay it
Mr Hammond said this was a £1.5 billion package to help people with the change to Universal Credit.
National Living Wage
The National Living Wage, for people aged 25 or over, will increase from £7.50 to £7.83 from April 2018; a £600 per year rise for full-time workers.
Mr Hammond announced that from 6th April 2018 the Personal Allowance, the amount which can be earned before income tax is paid, will rise to £11,850 from £11,500 in the current tax year .
The higher-rate tax threshold will also rise to £46,350 from the same date.
No changes were announced to the rates of Income Tax.
Alcohol & tobacco
Duty will be frozen on wines, spirits, cider (except white cider) and beer.
The cost of tobacco will rise by inflation, plus 2%.
A new railcard for people aged 26 – 30 will give a third off rail fares.
The Chancellor also announced that the scheduled rise in fuel duty, due to take effect in April 2017, will be cancelled.
Also, short-haul Air Passenger Duty will be frozen. However, there will be an increase on premium class tickets and private jets.
Mr Hammond spoke of the Government’s commitment to the NHS.
He then announced an additional £10 billion of capital investment, as well as £2.8 billion, day-to-day funding over next three years.
The Chancellor announced no changes to the rates of Corporation Tax.
Mr Hammond said: “There is a case now for removing the anomaly of indexation allowance for capital gains – bringing the corporate system into line with personal capital gains tax. I will therefore freeze this allowance.”
This measure will increase the tax bills paid by people selling their business.
Despite the usual speculation, and for the first time in many years, the Chancellor announced no significant changes to pension legislation, tax-relief or allowances.
There’s no doubt that will come as a relief to those people using pensions to plan for their retirement.
VAT (Value Added Tax)
Despite pre-Budget speculation, the Chancellor announced that the VAT threshold will remain frozen at £85,000 for the next two years.
However, a consultation on the structure of VAT was also announced.
The way in which business rates are increased each year will change.
From 2018, they will now rise in line with CPI (Consumer Prices Index) and not RPI (Retail Prices Index) saving £2.3 billion.
In perhaps the largest section of his speech Mr Hammond said: “Getting on the housing ladder is not a dream of your parents’ past but a reality for your future.”
He then outlined some of the Government’s accomplishments, but was clear that there is “more to do” to increase house building and help younger people onto the housing ladder.
Mr Hammond announced a £44 billion package of funding, loans and guarantees to help the housing market.
He also announced local authorities will now have the power to charge a 100% Council Tax premium on empty properties.
Finally, new measures to combat homelessness and rough sleeping were also announced.
First time buyers
The Chancellor announced that, from today, Stamp Duty will be abolished for all first-time buyer purchases up to £300,000.
To help first-time buyers in “high price areas” no Stamp Duty will be payable on the first £300,000 on property purchases up to £500,000. This is a stamp duty cut for 95% of all first-time buyers who pay stamp duty.
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