What’s in the Autumn 2016 budget?

budgetAgainst a backdrop of slower forecast growth and rising inflation, businesses can take comfort from the fact that the Chancellor still forecasts that the UK economy will have the fastest growth rate amongst major economies. Positive growth and rising employment are forecast for the next five years. However, the Government’s previously stated aim of achieving a budget surplus by 2019 has been diluted. It now aims to continue reducing the surplus until 2020 and balancing the budget as soon as possible after that. Key measures which will impact business and personal finances are summarised here to help you assess the impact for yourself and your firm:

Lower Corporation Tax on the horizon

Currently set at 20% corporation tax will be cut to 17% by 2020. The Gov.uk website reports that this is “by far the lowest in the G20 and benefitting over 1 million businesses”.

Investment for productivity

A new £23 billion fund, the National Productivity Investment Fund, will help to boost productivity investing in: transport infrastructure, housing, digital communications, and research and development. This includes £27 million for a new expressway linking Cambridge and Oxford.

Funds for housing infrastructure

A new Housing Infrastructure Fund makes £2.3 billion available for housing infrastructure projects such as roads, to support the building of 100,000 new homes where there is greatest demand. A further £1.4 billion is to be used for 40,000 new affordable homes, with £1.7 billion to accelerate house-building on public sector land.

More R&D funds

There will be £2 billion extra per year for investment in research and development by universities and businesses by 2020-21, such as artificial intelligence, industrial biotech and robotic.

Fast fibre-optic broadband roll-out

£1 billion will be available for private sector investment into the roll-out of full-fibre broadband by 2020-21, as well as for trialling 5G networks.

SME growth fund

Small businesses have long been recognised by Government as driving innovation and growth. In this budget, £400 million has been earmarked for investment in innovative small businesses with growth potential, aiding up to £1 billion in new investment.

Investment in future transport options

£390 million investment in future transport technology has been outlined, to include driverless cars and renewable fuels.

Support for the very rural businesses

Rural rate relief goes up from 50% to 100% in April 2017. This tax benefit is designed to support rural businesses operating where less than 3,000 live and applies to businesses which are the only village shop/post office or the only pub/petrol station with a rateable value of up to £8,500 or £12,500 respectively.

Higher tax on products for insurers

From 1 June 2017, the rate of Insurance Premium Tax charged to insurance companies will go up from 10% to 12%.

No more letting agent fees

The Government intends to ban letting agent fees, payable by tenants, which cover activities such as drawing up tenancy agreements and checking tenant status. Consultation is due to begin imminently. These fees cost renters an average of £223 per rental.

Minimum hourly pay rates for 25 year olds

The National Living Wage for those aged 25 goes up from £7.20 per hour to £7.50 per hour from April 2017. A full-time worker on the National Minimum Wage will see their pay increase by £1,400 per year.

Minimum hourly pay rates for under 25s

The National Minimum Wage for those younger than 25 goes up too from April 2017:

  • Age 16 -17 from £4.00 per hour to £4.05
  • Age 18 – 20 from £5.55 per hour to £5.60
  • Age 21 – 24 from £6.95 per hour to £7.05
  • Apprentices from £3.40 per hour to £3.50

Increase in untaxed earnings

The amount you can earn before tax will rise from its current level of £11,000 to a Personal Allowance of £11,500 in 2017-18. The threshold for paying the higher rate tax will go up from its current level of £43,000 to £45,000 by 2017-18.

Tax advantages of some salary schemes removed

Certain salary sacrifice schemes, will no longer get preferential tax treatment, such a mobile phone provided as a benefit in kind. Instead they’ll be taxed as if they were a cash income. Current schemes in place before April 2017 can remain the same for up to a year, and for up to four years if they relate to cars, accommodation and school fees. Some schemes will be exempt from this change, they are: pensions, pensions advice, Cycle to Work scheme, ultra-low emission cars and childcare.

New savings bond with guaranteed interest rate

For savers, a new 3-year NS&I Investment Bond will be available from spring 2017, expected to offer a rate of return of 2.2%.

No change on fuel duty

This tax remains frozen for the seventh year in a row, saving individual motorists an estimated £130 a year on average.

Your next steps

For financial management help, including tax advice please contact Tarrant Green & Company. You can email info@tarrantgreen.com or call +44(0)1438 869 644.