Autumn Budget 2017: Reaction from Robin Stevenson
Philip Hammond delivered his second budget today (Autumn Budget 2017) with the dual brief of getting the UK ready for Brexit and tackling economic hardship. He showed a brave face, and made a few jokes, as he tried to confirm or convince us that the UK is a leading economy with strong leadership and that we’re heading in the right direction.
The budget speech is always a mixture of messages, how we’re doing, where we’re going and how we’re going to get there, and it’s that last part which is of the most interest from my point of view because it’s that part that contains any changes to our tax system.
As ever, the speech itself contained headlines and key messages but, unusually these days, there wasn’t much “leaked” to the press beforehand.
From a purely tax point of view the key announcements were:
- Income tax - from 6th April 2018, the personal allowance increased to £11,850, and the higher rate threshold increased to £46,350. This will result in a tax bill of £1,075 less compared with that paid by most taxpayers in 2010/11.
- Stamp duty - an exemption for first time buyers purchasing properties up to £300,000. This could save first time buyers up to £5,000 in tax.
- The limit for investment in EIS companies will increase from £1m to £2m. This change appears to bring the current maximum income tax relief for investors up from £300,000 to £600,000 although the relief will be restricted in some cases.
- The research and development tax credit is being increased in January 2018 from its current 11% up to 12%. This change will affect companies that carry out qualifying Research and Development (R&D) and claim Research and Development Expenditure Credit.
- Indexation relief for companies will be frozen from 1 January 2018, beginning to bring the method of calculation of gains in companies nearer to that for individuals.
- No change in the VAT registration threshold, it remains at £85,000, or the VAT rate which continues at 20%.
- The headline rates of corporation tax to 2020 were announced in a previous budget and so I didn’t expect a change in that. There was little chance of the already low rate being reduced even more, and increasing the rate from 19% would have been tantamount to admitting previous forecasts were failing.
- Personal tax - the slight movement in allowance and tax bands were predictable. There was also a small adjustment to the marriage allowance but it still fell short of anything that I believe would make a significant difference to most working families.
- Inheritance tax - this has been a political football in recent years; remember Ed Milliband and the deed of variation, with much change being threatened. This tax is difficult to change without major surgery because most of the tax due is based on open market values which varies between different parts of the UK. A slight tweak one way would have brought more families into the IHT net which of course would have been bad news, and a slight tweak the other way would have kept some families out of the IHT net which invariably leads to criticisms of favouring the wealthy. A difficult nut to crack, and perhaps not too surprising that this tax was left well alone!
- VAT - at the start of the day I wasn’t sure which way the Chancellor was going to go. I wondered if there might have be an adjustment to the registration threshold and I guessed that there might have been an increase. Instead though, the threshold is frozen at £85,000, so at least we have a period of consistency for the next two years.
As mentioned before, the budget speech itself contains headlines and messages but fortunately detailed information is being released as we speak, which we’re collating into our handy budget report which we will be publishing in pdf form. Do please let us know if you would like a copy.
To discuss any elements of the Autumn Budget 2017 and what they might mean for your business...
Get in touch with Robin our Tax Partner:
Tel: 01825 763366
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