he Chancellor, Philip Hammond has announced the Autumn Budget 2017. Here is the budget in a nutshell:
Outlook on growth
Philip Hammond revealed a deteriorating outlook in his annual budget speech to Parliament, with slowing growth and a stubborn deficit
The Office for Budget Responsibility (OBR) now expects the economy to grow by 1.5% this year, down from the estimate of 2% it made in March Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021. The lower growth means that by 2021-22 government tax receipts will be £20bn lower than the OBR's March forecast.
In the Budget, Chancellor Philip Hammond revealed he was putting aside an extra £3bn for Brexit costs, on top of the £700m already reserved.
Housing had of course been billed as one of the key themes of the Budget - and the chancellor promised the "next generation" that getting on the housing ladder would not be just a "dream". Stamp duty will be abolished immediately for first-time buyers buying a home of up to £300,000.
The Chancellor furthermore pledged £44bn capital investment and measures aimed at getting building projects started. Mr Hammond said his change would benefit 95% of first-time buyers.
Tax-free dividend allowance
This has been cut from £5,000 to £2,000 from April 2018. So investors should be aware that dividend income above £2,000 will be taxed at 7.5% (basic rate taxpayers), 32.5% (higher rate taxpayers) and 38.1% (additional rate taxpayers.) The cut in allowance will mean that a higher rate taxpayer receiving £5,000 of dividend income will now face almost £1,000 in extra tax.
Personal tax allowances
The personal allowance – the first part of your taxable income on which the tax rate is 0% - will increase from £11,500 to £11,850.
The basic rate tax band in England, Wales and Northern Ireland will increase from £33,500 to £34,500. Higher-rate tax threshold to increase to £46,350National Living Wage to rise in April 2018 by 4.4%, from £7.50 an hour to £7.83.
The personal allowance is gradually withdrawn for those with taxable income of more than £100,000, and those with taxable income above £123,700 (2018/19) won’t get any personal allowance.
Most significantly, Hammond avoided tinkering with the tax relief system on pensions, contrary to widespread speculation.
As expected, today’s Budget confirmed that the state pension will increase by 3 per cent next April from £ 159.55 to at least £164.37 giving pensioners an annual rise of £250. However, those who reached state pension age before 6 April 2015 and are on the old basic state pension will only see their state pension increase from £122.30 to £125.97 a week, giving an annual increase of only £191.
Fortunately there was no U-turn in the lifetime allowance increase, which has been confirmed to increase . Although it was not mentioned in the speech, budget documents do confirm that the lifetime allowance will increase from April 2018. The increase is linked to the Consumer Prices Index measure of inflation and will see the allowance rise from £1m to £1,030,000.
No changes were announced to Inheritance Tax rates or allowances for 2018/19 in the Autumn Budget, however previously announced changes continue to take effect. The 6th April 2017 saw the introduction of the Residence Nil-rate Band (RNRB). This is an extra allowance on top of the standard Nil-rate band of £325,000, which is the first part of an individual’s estate on which no inheritance tax is paid.
Alcohol, tobacco and fuel
Tobacco will continue to rise by 2% above Retail Price Index (RPI) inflation, equivalent to 28p on a pack of 20, while the minimum excise duty on cigarettes introduced in March will also riseDuty on hand-rolling tobacco will increase by additional 1% Duty on beer, wine, spirits and most ciders will be frozen, equating to 1p off a pint of beer and 6p of a typical bottle of wine.
Capital Gains tax
The annual exempt amount for individuals and their personal representatives will increase from £11,300 in 2017/18 to £11,700 in 2018/19. For most trusts, the annual exempt amount will increase from £5,650 in 2017/18 to £5,850 in 2018/19.
Annual ISA Allowance
The annual ISA allowance will remain unchanged at £20,000 for the tax year 2018/19. Anyone aged 16 or over can save in a cash ISA, but stocks-and-shares are only available to investors aged 18 or over.
Philip Hammond announced an immediate £350m boost for this winter followed by £1.6bn more next year for the front line above the rise already planned. Designed to reduce waiting times to the actual expected performance target between now, and is expected to last until 2019-20.