Autumn Statement 2016: Key points

The Chancellor reported that the IMF predicts the British economy will be the fastest growing major economy in the world this year, and announced a raft of investment plans for infrastructure, with particular emphasis on information technology, research and development.

The details released today are shown below, but it was not a list of measures designed to help the freelancer or project based worker. In particular:

  • The planned IR35 changes in the public sector are still scheduled to go ahead, despite the lack (so far) of a working status assessment tool, or a mechanism of payment. Read our other posts for more detail on this.
  • The long standing 5% expenses allowance an IR35 company is allowed to use is being withdrawn for public sector workers, with very weak justification. The allowance was intended to reflect the costs, often not monetary, of running your own business, which have not gone away.
  • The VAT Flat Rate Scheme, used perfectly properly by a huge number of small businesses for many years is to be amended from April 2017, reducing the financial benefits of the scheme to almost nothing for some workers. The administrative benefits will remain.
  • There was a tone running through the statement of dissatisfaction with compliance in the freelancer community. While we accept that there are non-compliant operators in the sector, we feel there has been an oversimplification of the issues, and a lack of acknowledgement of the efforts by, and clients of, compliant advisors such as ourselves.  We find this tone disappointing.

If you have a company and are contracting to the public sector, do contact us to discuss your options.  We’d be very happy to take care of your affairs through our umbrella company if you have to consider this option.

Detailed measures:

Taxation/pay

  • Income tax threshold to be raised to £11,500 in April, from £11,000 now
  • Higher rate income tax threshold to rise to £50,000 by the end of the Parliament
  • Corporation tax will be reduced to 17%
  • Tax savings on salary sacrifice and benefits in kind, such as gym membership and mobile phone deals, to be stopped, with exceptions for ultra-low emission cars, pensions, childcare and cycling
  • National Living Wage to rise from £7.20 an hour to £7.50 from April next year
  • Employee and employer National Insurance thresholds to be equalised at £157 per week from April 2017
  • Insurance premium tax to rise from 10% to 12% next June
  • New savings bond launched with an interest rate of 2.2%
  • £2bn will be raised from abolishing tax advantages and targeting tax avoidance

Welfare

  • Universal Credit taper rate to be cut from 65% to 63% from April at a cost of £700m
  • No plans for further welfare savings in this Parliament

Housing

  • Ban on upfront fees to tenants charged by letting agents in England “as soon as possible”
  • £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas
  • £1.4bn to deliver 40,000 extra affordable homes

Fuel

  • Fuel duty rise cancelled for seventh year in succession at a cost of £850m, saving average car driver £130 and van driver £350 a year
  • For the oil and gas sector, the Carbon Price Support will be capped until 2020 and business rates reductions worth £6.7bn will be implemented

NHS 

  • £10bn of additional funding by end of 2020/21

 The state of the economy

  • The chancellor promises “fiscal headroom” to support the economy through Brexit
  • Office for Budget Responsibility (OBR) growth forecast upgraded to 2.1% in 2016 – from 2.0% – then downgraded to 1.4% in 2017, from 2.2%
  • OBR forecasts growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021
  • Government no longer seeking a budget surplus in 2019-20: Mr Hammond says he is committed to returning public finances to balance “as soon as practicable”
  • OBR predicts that GDP will be 2.4% lower in 2020 than it would have been without Brexit
  • There is a higher degree of uncertainty on these figures than usual
  • Employment grew fastest in north-east of England in past year

Public borrowing/deficit/spending

  • Debt will rise from 84.2% of GDP last year to 87.3% this year, peaking at 90.2% in 2017-18
  • OBR forecasts borrowing of £68.2bn this year, then £59bn in 2017-18, £46.5bn in 2018-19, £21.9bn in 2019-20 and £20.7bn in 2020-21
  • Lowest deficit as a share of GDP in 2 decades
  • Deficit now projected at £21bn going into next General Election
  • Government debt to peak at 20.2% of GDP in 2017/18
  • £23bn to be spent on innovation and infrastructure over five years
  • £2bn per year by 2020 for research and development funding
  • Public spending this year to be 40% of GDP – down from 45% in 2010
  • Departmental spending plans set out in 2015 Spending Review to remain in place
  • Government will meet commitments to protect budgets for key public services, defence, overseas aid and the pension “triple lock” until the end of this Parliament

Transport/infrastructure/regions

  • £1.1bn extra investment in English local transport networks
  • £220m to reduce traffic pinch points on strategic roads
  • £110m for East West Rail and commitment to deliver Oxford to Cambridge Expressway
  • More than £1bn for digital infrastructure, including 5G mobile
  • 100% business rates relief on new fibre infrastructure
  • £250m extra per year to Northern Ireland
  • £400m extra per year to Wales
  • £800m extra per year to Scotland
  • £1.8bn from Local Growth Fund to English regions
  • Midlands rail hub given the go-ahead
  • Work to begin on a new city deal for Stirling
  • Rural Rate Relief to be increased to 100%, “giving small businesses a tax break worth up to £2,900”
  • £7.6m for repairs to Wentworth Woodhouse, near Rotherham, said to be inspiration for Pemberley in Jane Austen’s Pride and Prejudice

Business

  • Doubling UK export funding capacity
  • £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms

Other

  • Ministry of Justice to receive emergency funding for 2,500 more prison officers
  • Autumn Statement to be abolished, with Budgets planned for autumn from next year, along with “Spring Statement” from 2018 but with no fiscal changes
  • Reforms to compensation for whiplash to cut the cost of motor insurance
  • £102m of Libor bank fines to go to armed forces and emergency services charities

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