Philip Hammond delivered his first October budget with the ambitious statement that ‘The era of austerity is finally coming to an end’. But was there an easing of Treasury purse strings?
With Brexit less than 6 months away no one was expecting fireworks from this budget and in terms of tax measures this seems to be the case. However, to justify his and Theresa May’s assertion of the end of austerity there were some spending increases on the back of the increased 2018 growth forecast (increased to 1.6% from previously predicted 1.3%) and budget deficit reduction – the 2018/19 budget deficit for the fiscal year cut to £25.5bn from the £37.1bn forecast in March.
Notable spending announcements were:
- £20.5bn increase for the NHS over the next 5 years
- An extra £1bn in defence spending to boost cyber capabilities
- £420m extra to repair potholes
- £160m for counter terrorism
- £60m for planting trees
- £500m for the Housing Infrastructure Fund
There was also further funding for the Universal Credit in an attempt to diffuse the criticism levied at the Universal Credit, particularly from the Labour front bench.
With real wage growth predicted for the next 5 years by the Office for Budget Responsibility, the Chancellor could afford a sunny outlook although every silver lining has a cloud. Perhaps to curb the air of optimism, there was also a further £500m set aside in case of a no deal Brexit. There will be a further statement in March which could become a full Budget if required.
The Personal Allowance for Income Tax will increase from £11,850 to £12,500 in April 2019 with the higher rate tax threshold increasing from £46,350 to £50,000 at the same time. Both of these are set to be indexed by inflation after 2021/22. Those with incomes of greater than £100,000 will still see their Personal Allowance reduced by £1 for every £2 of excess income.
The ISA limit will remain at £20,000 for the 2019/20 tax year making this the third year in a row with this limit. However, the Junior ISA allowance will increase to £4,368.
The Budget revealed that the Department for Work and Pensions will this winter publish a paper setting out Government policy on self-employed pension saving. Some have suggested this could be the advent of auto enrolment for the self-employed as a method of increasing pension participation for the self-employed. Pension tax reliefs remain unchanged at this time.
The National Living Wage will increase in April from £7.83 to £8.21 per hour.
There will be an extension to the cancellation of stamp duty for first time buyers on properties valued up to £300,000 and shared ownership properties valued at up to £500,000.
The qualifying period for Entrepreneurs Relief will be increased from 1 to 2 years for entrepreneurs to benefit from a reduced rate of Capital Gains Tax on share sales.
The minimum investment in Premium Bonds will reduce from £100 to £25 to make these more accessible as well as allowing these to be gifted to children by those out side of their immediate family.
In a measure aimed at targeting the largest global internet businesses there will be a new Digital Services Tax for firms with global revenues of at least £500M. This new tax is scheduled to take effect from 2020.
The Annual Investment Allowance will be temporarily increased to £1M with the VAT registration threshold to remain unchanged.
Duty on fuel, beer, cider and spirits is frozen with duty on wine to rise in line with RPI Inflation and white ciders to be taxed at a new higher rate.
Of course, if you need help with the above points, or any other matters relating to the recent Budget, please do not hesitate to contact your wealth manager at NW Brown.