The autumn statement is an opportunity for the government to review and declare it’s spending for the next year. Most of the press commentary, prior to the Chancellor’s comments today, involved speculation on which areas of government would suffer the biggest cuts. Now we know…
Major opposition to cuts in tax credits and the police budget seem to have paid off as the previously announced cuts in tax credits have been abandoned and there are to be no cuts in the police budget.
The major changes that affect individuals and businesses are set out below:
Announcements for businesses
Support for smaller businesses
The Chancellor reported that the UK’s Small and Medium sized Enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.
The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.
Other support for smaller businesses that have previously been announced include:
- From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
- The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament.
- The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.
Apprenticeship levy
Earlier this year it was announced that three million new apprenticeships would be created by 2020. To fund this target a levy is to be made on large employers.
The details of this levy have now been quantified.
The apprenticeship levy will commence in April 2017 at a rate of 0.5% of the employers’ pay bill. To exclude smaller employers a £15,000 allowance can be claimed. In this way only employers with a pay bill in excess of £3 million will contribute to the levy.
In some cases this levy may cancel out the intended reductions in Corporation Tax for larger employers.
Small business rate relief
English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.
The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
Car benefit diesel supplement
The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.
Announcements for home owners
London help to buy loan scheme
The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.
As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.
These government equity loans will now be available until 2021.
Help to buy shared ownership scheme to be extended
Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.
The rent charge won’t be more than 3% of the non-purchased part of the property.
The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.
First time buyers’ starter homes discount
200,000 new homes are to be designated starter homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.
Stamp duty increase for second homes and buy-to-lets
From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.
Housing Association tenants
Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.
Capital Gains Tax (CGT) on sale of residential property
From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.
This will not apply where no CGT is payable, for example if covered by Private Residence Relief.
Announcements for individuals
Tax credits
As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:
- The rate at which a claimant’s award is reduced over the income threshold, will remain at 41% of gross income.
- The income threshold will remain at £6,420.
- The income threshold for child tax only claimants will remain at £16,105.
- The income disregard will reduce from £5,000 to £2,500.
As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.
The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.
Basic State Pension increase announced
From April 2016, the basic weekly State Pension will increase to £119.30, an increase of £3.35.
Part-time rail season tickets and money back…
Two new features to be introduced:
- Commuters will be able to buy part-time season tickets on selected routes, and
- Commuters will be able to claim money back if a train is more than 15 minutes late.
VAT raised on sales of women’s sanitary products
The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women’s charities.
George Osborne said:
“300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we’re committed to getting the EU rules changed.
Until that happens, I’m going to use the £15 million a year raised from the Tampon Tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven – and I invite bids from other such good causes.”
Warm home discount scheme extended
The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.
Minor whiplash claims to be curtailed
In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.
More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.
This may reduce the cost of insurance for motorists – estimated falls of £40 to £50 a year can be expected.
Source: HM Revenue & Customs
