Autumn Statement 2016 Summary from The Avanti Group (UK) Ltd highlights the main points of interest, for a quick easy view of the announcements made:
State of The Economy
- Office for Budget Responsibility (OBR) growth forecast upgraded to 2.1% in 2016 – from 2.0% – then downgraded to 1.4% in 2017.
- Forecast growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021.
- Government no longer seeking a budget surplus in 2019-20 – committed to returning public finances to balance “as soon as practicable”
Public Borrowing / Deficit & Spending
- Government finances forecast to be £122bn worse off in the period until 2021 than forecast in March’s Budget
- Debt will rise from 84.2% of GDP last year to 87.3% this year, peaking at 90.2% in 2017-18
- OBR forecasts borrowing of £68.2bn this year, then £59bn in 2017-18, £46.5bn in 2018-19, £21.9bn in 2019-20 and £20.7bn in 2020-21
- Public spending this year to be 40% of GDP – down from 45% in 2010
- Departmental spending plans set out in 2015 Spending Review to remain in place
- Government will meet commitments to protect budgets for key public services, defence, overseas aid and the pension “triple lock” until the end of this Parliament
Transport / Infrastructure / Regions
- Fuel duty rise cancelled for seventh year in succession – at a cost of £850m, saving average car driver £130 and van driver £350 a year
- £1.1bn extra investment in English local transport networks
- £220m to reduce traffic pinch points
- £23bn to be spent on innovation and infrastructure over five years
- £2bn per year by 2020 for research and development funding
- £110m for East West Rail and commitment to deliver Oxford to Cambridge Expressway
- More than £1bn for digital infrastructure and 100% business rates relief on new fibre infrastructure
- £1.8bn from Local Growth Fund to English regions
- Rural Rate Relief to be increased to 100%, “giving small businesses a tax break worth up to £2,900”
- Doubled free child care for working families from September
- A new £4,000 ISA that you can use to save for retirement or to buy your first home
- From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money. Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.
- The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.
- The Money Purchase annual allowance reducing from £10,000 pa to £4,000 pa from 6th April 2017.
- This is the limit for taxpayers over 55 who have already started drawing on their pension funds. This is to restrict individuals from recycling their pension funds and benefitting from the 25% tax free lump sum, whilst gaining full tax relief when making the contribution.
- The normal annual allowance limit remains at £40,000 pa.
- Personal Allowance will increase to £11,500 from April 2017. £12,500 will be reached by end of Parliament and will then rise with inflation and for the Chancellor to decide.
- Higher rate income tax threshold to rise to £45,000 from April 2017
- Tax savings on salary sacrifice and benefits-in-kind to be stopped, with exceptions for ultra-low emission cars, pensions, childcare and cycling
- National Living Wage to rise from £7.20 an hour to £7.50 from April next year
- Employee and employer National Insurance thresholds to be equalised at £157 per week from April 2017
- Insurance premium tax to rise from 10% to 12% next June
- From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due. For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.
- The National Minimum Wage rates (which were last increased in October 2016) from April 2017 will increase accordingly:
- Aged 21 to 24 – an increase from £6.95 to £7.05 per hour
- Aged 18 to 20 – an increase from £5.55 to £5.60 per hour
- Aged 16 to 17 – an increase from £4.00 to £4.05 per hour
- Apprentices – an increase from £3.40 to £3.50 per hour
Making Tax Digital
HM Revenue and Customs (HMRC) believes that by digitalising the UK tax system, the regime could become much less burdensome with a reduction in red tape for small business owners.
HMRC’s benefits of the Making Tax Digital programme include:
- Cash-basis accounting – Thousands more can pay the tax they owe based simply on the difference between money they have taken in and what they have paid out; so tradesmen will pay tax on cash received, as opposed to invoices issued.
- Prompts and alerts to help businesses get tax right, give advice and provide information on tax reliefs they might be missing out on.
- Businesses won’t have to wait until the end of the year to discover how much tax they owe.
“We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans…..This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills…..By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first.” Jane Ellison MP, Financial Secretary to the Treasury.
Capital Gains Tax
- Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay. Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).
- Rates will be cut from 6 April 2016, but residential property will still be taxed at current rates
- From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.
- There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).
- Doubling UK export funding capacity
- £400m into venture capital funds through the British Business Bank to unlock £1bn in finance for growing firms
- Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less. From April 2017, rate payers that occupy a single property with a rateable value of £12,000 or less will pay no business rates.
- There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.
- The main rate of Corporation Tax has already been cut from 28% in 2010 to 20% and is set to reduce again to 17% by 2020.
- 100% first-year allowance available for expenditure incurred on electric charge-point equipment. The allowance will come to an end on 31st March 2019 for Corporation Tax purposes and 5th April 2019 for Income Tax purposes.
Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018
- Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year. From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs.
- Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits. After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.
VAT Flat Rate Scheme
Businesses with total income of less than £150,000 are eligible to use the VAT Flat Rate Scheme. The VAT due is calculated by applying a predetermined flat rate percentage to the business turnover of the VAT period. The percentage rates are predetermined according to the trade sector of your business, ranging from 4% to 14.5% available on the HMRC website. https://www.gov.uk/vat-flat-rate-scheme/overview
From 1 April 2017 there will be a new (higher) VAT flat rate of 16.5% for “businesses with limited costs”. Currently, businesses determine which flat rate percentage to use by reference to their trade sector.
From 1 April 2017, however, they must also determine whether they meet the definition of a limited cost trader*, which will be one whose costs of goods is one of the following: zero, less than 2% of turnover; or less than £1,000 per year.
*A limited cost trader is defined as a business whose VAT inclusive expenditure on goods is either:
- Less than 2% of their VAT inclusive turnover in a prescribed accounting period
- Greater than 2% of their VAT inclusive turnover, but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000)
Limited Cost Measure- goods must be used exclusively for the business, excluding the following items:
- Capital expenditure
- Food or drink for consumption by the flat rate business or its employees
- Vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – e.g. a taxi firm – and uses its own or leased vehicle to work)
The exclusions of the above items are designed to prevent traders from buying low-value everyday items or one-off purchases in order to inflate costs beyond the 2% figure and escape the new 16.5% threshold.
The Chancellor believes the new 16.5 per cent VAT flat rate will stamp out “inappropriate” use of the scheme, but the announcement may harm service-based businesses such as contractors and consultants.
If you are currently on a flat rate scheme, consider whether this applies to you. If the measure means the Scheme is no longer beneficial for you, you may revert to standard VAT accounting, but we suggest you take action ahead of April 2017.
- 5g 1 billion on digital on fibre networks
- New stamp duty rates for commercial property from 17 March 2016
- The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band.
- The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.
- Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.
- Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million.
The Chancellor confirmed today that “I am abolishing the Autumn Statement”. The plan is to have an Autumn Budget starting 2017, announcing tax changes well in advance of the start of the tax year. However, Hammond stated “if unexpected changes in the economy require it, then I will of course, announce actions at the Spring Statement, but I won’t make significant changes twice a year just for the sake of it. This change will also allow for great Parliamentary scrutiny of Budget measures ahead of their implementation”.
For more in-depth details in to the various elements of the Autumn Statement visit: https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016-index
How Can We Help You?
We are very proactive and provide customer service steps, in addition to the standard accountancy work provided.
- Reminding you of important dates & deadlines (including; vat year end / tax returns / payment of tax)
- Tax telephone meeting prior to the accounts preparation
- Accounts meeting upon completion of 1st draft account
- Emailed monthly information newsletters
- Providing free telephone advice (any complicated advice that requires investigation and calculations would be charged, but we would advise you)
- Providing maximum 4-hour response to emails and telephone messages where possible
- Invitations to free business seminars
- Services tailored to meet client requirements
- We can meet you at your premises or our offices, whichever is more convenient
- We can collect paperwork from your premises
………And we do all of this in a friendly and approachable way
If you would like more information on any area in particular, do give us a call on 01473 558866 or email email@example.com
The Avanti Group (UK) Ltd
Unit 4, Brightwell Barns, Waldringfield Road, Brightwell, Suffolk IP10 0BJ
Tel: 01473 558866 – www.avantigroup.uk.com
Information obtained for this summary from AccountingWeb / HMRC / BBC 5 Live Autumn Statement Live Broadcast