Chancellor Philip Hammond’s Autumn Statement on Wednesday — his first and last as he introduced a new system of Autumn budgets and Spring statements — set out how the government intends to rebalance its books as the deficit widens. There were few major giveaways, with help concentrated on those “just about managing”.
Higher earners were spared cuts to tax allowances for now, while there was also a sweetener for savers in the form of a new government vehicle with a decent interest rate attached.
Here is our summary of how the key measures will affect your personal finances:
Working families who are “just about managing” received the only real giveaways — though the jam was thinly spread.
Mr Hammond said he would increase the National Living Wage to £7.50 an hour, up from £7.20, from April 2017, and announced a reduction in the so-called taper rate of universal credit — the system that has replaced benefits such as working tax credit and child benefits — to 63 per cent. This means benefits will be withdrawn at a rate of 63p for every pound of net earnings, instead of the previous 65p per pound.
The chancellor also confirmed there were “no plans for further welfare savings measures beyond those already announced”.
The Resolution Foundation, a think-tank, warned before the statement, however, that such a small tweak would only slightly reduce “the hit to just about managing families’ incomes that are coming down the track” because of previously announced benefit cuts.
As trailed, letting agents’ fees are to be banned for millions of tenants in rented properties, a measure the government said would relieve the strain on those facing annual charges of several hundred pounds or more.
“Landlords appoint letting agents, landlords should pay their fees,” the chancellor said.
Consumer and tenants groups welcomed the move, saying the fees had spiralled in the past decade, but estate agents and landlords warned that some of the costs may now be passed back to tenants via higher rents.
The chancellor also said that £1.3bn would be committed for building 40,000 new affordable homes, in addition to a plan to build 100,000 new homes in areas of high demand, funded by a £2.3bn housing infrastructure fund.
London will receive £3.15bn for its part in a national programme of affordable housing, with the aim of building 90,000 such homes.
The tax break on salary sacrifice schemes on employees’ benefits in kind will be removed from next April. However, salary sacrifice on pensions, childcare, low emission cars and cycle to work schemes will be protected.
Continuing the last administration’s efforts to battle tax avoidance the chancellor pledged to abolish tax advantages “linked to employee shareholder status”, which he said was “being used for tax planning by higher earners”.
This relates to a scheme introduced by Mr Hammond’s predecessor George Osborne in 2012, which allowed a new “employee shareholder” status, allowing people to receive between £2,000 and £50,000 of capital gains tax-exempt shares.
The crackdown on avoidance will raise more than £2bn in the next five years, the chancellor said.
Mr Hammond confirmed the commitment to increase the personal income tax allowance to £12,500 by the end of the parliament. The higher rate income tax threshold will be £50,000 by the end of the parliament. Fuel duty rises will also be cancelled for the seventh successive year.
There were no changes to current levels of pensions tax relief, as many had feared. However, new measures have been announced to clamp down on the recycling of pensions savings by over 55s by restructuring the money purchase annual allowance. Over £7bn has been taken out via pensions freedoms so far. If savers are still in work, their allowances have been £10,000 per year, but this will be reduced to £4,000 to prevent inappropriate double tax relief being gained.
The pensions “triple lock” that has protected their income since 2010 will be maintained until the end of the current parliament, despite heavy pressure from MPs.
The triple-lock guarantees that pensions rise by the same as average earnings, the consumer price index, or 2.5 per cent, whichever is the highest.
Government plans to tackle pension scams were confirmed, including banning cold calling.
Finally, over-55s who have accessed their pension savings flexibly are to see future contributions to a pension restricted to £4,000 a year, down from £10,000.
The Treasury said the cut to the money purchase annual allowance was “fair” and would also limit opportunities for cash already drawn from a pension to be recycled back into a pension pot, and thereby benefit twice from tax relief.
The government is to consult on the measure.
August’s interest rate cut prompted high street banks to slash rates, but the chancellor promised a new “market leading” savings bond from Premium Bonds issuer National Savings & Investments. He said it would be launched after the Spring Statement next year, to help those with “modest savings” who have suffered from low interest rates. With a gross interest rate of 2.2 per cent over a three-year term, savers can invest up to £3,000. The government expects 2m people to apply.
The chancellor said raising productivity was “essential”, announcing a £23bn national productivity investment fund to spend on infrastructure and innovation over the next five years.
Commuters and infrastructure investors were given some reasons for optimism, meanwhile. Mr Hammond announced a £1.1bn investment in English transport networks, £220m to relieve congestion on strategic roads, and more than £1bn for digital infrastructure, including supporting 5G trials.
Reporting by Naomi Rovnick, James Pickford, Josephine Cumbo, Vanessa Houlder, Aime Williams and Claer Barrett
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