ALFIE5 – 5 top takeaways from last week’s Annual Autumn Statement

On 23 November 2016, Philip Hammond, Chancellor of the Exchequer, delivered in his own words what he stated was a ‘sober’ Autumn Statement, focused on ‘preparing & supporting the economy, as the [UK] begins to write a new chapter in [the] country’s history’. This resonated with many who were preparing for the worst considering the inevitable financial fall out Brexit and its impact on the UK economy.

Although not directly mentioned, the cost of leaving the EU was set out in detail both within his green Autumn Statement booklet and the Office for Budget Responsibility’s (OBR) analysis. The Government set out its requirements for an additional £412m in funding to support trade policy as Britain negotiates its exit from the EU. It was also stated that the UK would need to borrow an extra £122bn over the next 3 years, to ensure it remains box fit after Brexit. Though the OBR has materially lowered its growth forecasts for the UK with an anticipated drop of over .5 pct in GDP over the course of the next few yeas, down from pre Brexit estimates.

But importantly how does this financial statement help or hinder you? From new affordable homes through to tax cuts for business, here are the ALFIES 5 top takeaways from this year’s Statement.

  1. Tax on Income

For those starting out on the ladder of working life in the City, the National Living Wage will increase in 2017 from £7.20 to £7.50, making full-time workers on the hourly minimum £1,400 better off a year.  However, some of Hammond’s critics said he could have gone further accelerating increases in both minimum wage and income allowances, in order to provide families with a cushion during perceived difficult times.

More relevant to City workers, is the Higher Rate Threshold for 2017/18 set at £45,000, which will positively impact 65 percent of City Workers and importantly is to increase to £50,000 by 2020-21 assisting up to 70 percent of you.   Prepare for extra holidays, weekends away and house extensions as a result.

It is also interesting to note that from April, the income tax threshold will rise from £11,000 to £11,500. That means a worker earning £15,000 will pay just £800 in income tax. By 2020, the allowance will increase further, to £12,500.  Though not likely to affect many of you, its still change worth noting.

  1. Landlords and Letting agent fees 

If you are a city professional, you may well be renting a home or a buy-to-let landlord. Either way, the following will affect you

Hammond was hot on the heels of letting agents who have hampered the ability of tenants to rent properties in the UK and particular in inner cities for decades.   A ban on fees will, it is hoped, assist millions of households struggling in the private rental sector, where rents have sharply increased over the past five years. Interestingly, in response to his announcement, shares in listed estate agents fell steeply: Foxtons the London-focused agency, slid by as much as 8pc. Shares in Countrywide were down by 6.4pc, while LSL Property slumped by 6pc.

Prospective and current tenants have welcomed the policy with open arms, citing a potential average saving of 400 pounds a household. However, critics argue that it will achieve the opposite result, leading to higher rents as lettings agents pass the fees to landlords, which inevitably will come full circle back to the tenants. The ban on fees is the most recent of levy on landlords. In 2017, tax reliefs on mortgage interest will be reduced, while the Bank of England announced affordability criteria for buy-to-let mortgage borrowers for the first time restricting their ability to buy second homes.

  1. Pensions and Savings

Are you saving up, or spending it? Either way, the Government is tightening its belt. New saver schemes are to be introduced with even higher rates eligible for tax-free investments.

If you are looking to offset taxes and you are professional parents then you will be glad to note that tax-free childcare is to be rolled out in early 2017.   However, some will be disappointed that the allowance for saving into a pension for those who have started to “draw down” their pension savings, which is to be cut to £4,000 from £10,000, particularly if they have a project to fund or money to unlock. It is also worth noting that a three-year NS&I Investment Bond will be available from spring 2017.

A not so friendly rule is that employees who use tax perks: Rules that govern salary sacrifice (buying services such as mobile phone contracts from your pre-tax income via your company) are to be tightened. Up until now, many companies and employees have benefited from salary sacrifice schemes, in which the price of perks, such as gym membership and private healthcare, are deducted from paye before tax, saving both the employee and the employer money. But Hammond has rewritten the rules.  With the exception of ultra-low emission cars, pensions, childcare and cycling, salary sacrifice has been stamped out.

  1. Business Owners and Tax Avoiders Warning

Own a business, or looking to start one in order to save tax or reinvest your money to offset tax? In a renewed effort to clamp down on tax avoidance, Hammond announced that £2bn in revenue would be accrued from tightening up tax loopholes.  That means an end to flat rate VAT schemes and use of employee shareholder status.

There will also be a new penalty for repeated use of tax avoidance schemes. That’s bad news for an awful lot of small and medium-sized businesses who use employee shareholder plans to minimise their tax contributions. It’s also not great for those with limited companies, who benefit from the flat rate VAT scheme.

If you are a financial advisor or an accountant, note that you will now be aware of the penalty for those helping someone else to use a tax avoidance scheme.

  1. More affordable Housing and Tackling Transport

Alongside the plan to ban letting agents fees to increase private rentals, the Government is investing £1.4bn in building 40,000 affordable homes and 30,000 of which are outside city centres, helping to drive up the cost of homes in the City as urban regeneration continues.

A £2.3bn housing infrastructure fund has also been set up which will help provide 100,000 new homes in high-demand areas which will help to drive up the value of your homes and lower the cost of rentals.

What of increasing the efficiency and speed of our transport links? Hammond is heavily focused on making the UK move in all respects. A seventh consecutive freeze on fuel prices has been put in place as was to be expected. He has also earmarked £2.6bn to tackle congestion and prepare for the development and maintenance of the UK’s transport networks aimed at reducing traffic and subsequent environmental as well as financial costs. £1.1bn will be spent on extra investment in local transport networks in England, £220m will go towards reducing areas of congestion on key roads and £110m will be earmarked for East West Rail and commitment to deliver and Oxford to Cambridge Expressway.

Oh and one final point to note, those addicted to their mobile phones and tablets, will be glad to note that £1bn to invest in full-fibre broadband and trialling 5G networks.

ALFIES is a complimentary exclusive membership only network for individuals in the accountancy, law, finance and insurance professions.

Over a thousand of people from four business critical sectors are already able to benefit from:

  • Focused industry updates from leading periodicals in a dedicated newsfeed;
  • Access to upcoming events with industry thought leaders and influencers;
  • Superb offers provided by our lifestyle and hospitality partners; and
  • A bespoke private marketplace to buy and sell to fellow colleagues in your marketplace.

Request your free membership at alfies.com and start building your professional circle. 

Read more from the series:

ALFIE5 – 5 TOP TRUMPS – CAN HE PROMISE AND DELIVER?

ALFIE5 – Top Five tips to avoid a calamitous Christmas work celebration

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