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Briefings

Member Briefing: ‘Strong and stable economic platform’ for Brexit negotiations, says Chancellor

Date: 08/03/17

‘Strong and stable economic platform’ for Brexit negotiations, says Chancellor

In a statement with far fewer major announcements than seen under previous Chancellors, Mr Hammond focused his Budget statement on minimising the differences in tax treatment of different individuals and offering support for small businesses disadvantaged by the planned business rate revaluation.

Elsewhere, technical education has been prioritised through an increase in the availability of training for 16-19 year olds pursuing technical qualifications from 2019/20.

Economic outlook

  • The Office for Budget Responsibility (OBR) expectations of GDP growth between 2017 and 2021 are largely stable with a slightly different profile for growth as increased output is forecast earlier in the period, including for 2017.
  • The fall in the value of sterling during 2016 is expected to push inflation to 2.4% in 2017 and 2.3% in 2018 before falling back to the targeted 2.0% in 2019
  • Employment is expected to rise in each year of the outlook to 2021
  • Weakness in income growth is eventually expected to subdue consumer spending increases more than has been seen in recent quarters

 

Stamp Duty

No changes to the structure, rates or profile of SDLT are to be considered but, following consultation, the government will delay the reduction in the filing and payment windows for the tax until 2018/19, rather than being introduced this April.

Reflecting higher than expected residential property transactions, the OBR has revised upwards its forecast for SDLT receipts by £300m in 2016/17 and £800m per year in 2017/18 and 2018/19, but transactions are expected to fall due to the ‘forestalling in the advance of the additional properties surcharge’. While transactions at higher price points have fallen the most they are up somewhat on the OBR’s November forecast.

Personal taxation

The Chancellor highlighted current differences in marginal tax rates between employed and self-employed people, announcing an increase in Class 4 National Insurance Contributions (NICs) for self-employed earners. This change is expected to yield an additional £645m per year by 2019/20, partly offset through the abolition of Class 2 NICS for self-employed people from 2018/19.

The Chancellor will, from April 2018, reduce from £5,000 to £2,000 the annual tax-free dividend allowance. This takes account of increased ISA allowances to ‘ensure that support for investors is more effectively targeted, and make the total amount of income they can receive fairer and more affordable’.

To create a fairer tax regime, and address inconsistencies in the treatment of different forms of remuneration, the Government will consult on:

  • Employee expenses (a Call for Evidence will be published seeking information on the use of income tax relief for expenses)
  • Taxation of benefits in kind (specifically exemptions and valuation methodology)
  • Accommodation benefits

 

T-Level qualifications

The Chancellor has confirmed that the Government will implement the recommendations of Lord Sainsbury’s Independent Review on Technical Education. The number of programme hours of training for 16-19 year olds on technical routes will be increased by more than 50%, including the ‘completion of a high quality industry work placement’ during the programme. This will be introduced from 2019/20. The new T-Level qualifications had been trailed extensively in the media in recent days.

Consumer issues

The Chancellor highlighted the forthcoming green paper on consumers and markets which will examine markets that are ‘not working efficiently or fairly’. Initially the Government will:

  • Legislate at the earliest opportunity to allow consumer enforcement bodies, such as the Competition & Markets Authority, to ask courts to order civil fines against companies contravening consumer law
  • Consider how to make terms and conditions clearer, simpler and shorter

 

Other announcements

  • Further devolution to London via a new Memorandum of Understanding with the Mayor giving the capital greater control over transport, infrastructure, business rates, skills, employment support, health and criminal justice.
  • A new Midlands Engine Strategy to be published tomorrow
  • A technical change to the Finance Act 2016 will be made to put on equal footing all developers of land. While the change last year brought all profits from developing land into the tax liability, there was an exception for land where the contract for disposal was entered into before July 2016. The amendment to the Act will bring within scope profits on all land development. More on this technical change can be found here

The full Budget report and supporting documents can be accessed here. The OBR’s documents can be found here.