Key Points of Chancellor’s Autumn Budget Statement 2016
A summary of the main points of Wednesday’s budget statement.
The Chancellor has presented his Autumn Statement to Parliament – here’s a summary of what was announced.
Continuing to bring down the deficit
1. New economic forecast
The UK economy is forecast to be the fastest growing major economy in 2016, but the Office for Budget Responsibility has forecast growth to slow and inflation to rise over the next two years.
But growth remains positive and employment continues to rise in each of the next 5 years, with half a million more people forecast to be in work by 2021.
2. Debt falling by 2020
The government has cut borrowing by nearly two-thirds since 2010, but will no longer aim for a budget surplus (where more tax is raised than is spent) by 2019.
New fiscal targets are needed to provide the flexibility to support the economy and create space for more investment in roads, rail, research, and housing.
The government has therefore set new fiscal targets which aim for 2% underlying deficit and debt falling by 2020, and a balanced budget as soon as possible thereafter.
Building an economy that works for all
3. Fuel duty will remain frozen for a seventh year
In 2017, fuel duty will remain frozen for the seventh successive year, saving drivers £130 a year on average.
4. A new three-year NS&I Investment Bond available from spring 2017
To support savers, NS&I will offer a new three-year Investment Bond with an indicative rate of 2.2% from spring 2017. The bond will offer the flexibility to put away between £100 and £3,000 and be available to those aged 16 or over.
5. Committing to raise the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21
The Personal Allowance is the amount of income you can earn before you start paying income tax. It is currently £11,000 this year, and will rise to £11,500 in 2017-18. The point at which you pay the higher rate of income tax will increase from £43,000 this year, to £45,000 in 2017-18.
Once the Personal Allowance reaches £12,500, it will increase in line with inflation.
6. The National Living Wage and the National Minimum Wage will increase from April 2017
The National Living Wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. That means over £1,400 a year more for a full-time worker previously on the National Minimum Wage.
The National Minimum Wage will also increase:
- for 21 to 24 year olds – from £6.95 per hour to £7.05
- for 18 to 20 year olds – from £5.55 per hour to £5.60
- for 16 to 17 year olds – from £4.00 per hour to £4.05
- for apprentices – from £3.40 per hour to £3.50
And £4.3 million will be spent on:
- helping small businesses to understand the rules
- cracking down on employers who are breaking the law by not paying the minimum wage
7. The Universal Credit taper will be reduced from 65% to 63% from April 2017
In Universal Credit, as a person’s income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person’s salary increases.
Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. They will now keep 37p for every £1, from April 2017.
Three million households will benefit from this change:
- a single parent with one child and not receiving support with their housing costs earning £15,000 a year will benefit by £170 a year
- a couple with two children receiving support with their housing costs, where one parent earns £30,000 a year, will benefit by £425 a year
- a disabled person receiving support with their housing costs and earning £12,000 a year will benefit by £180 a year
8. A ban on letting agents charging fees to renters
Letting agents will no longer be able to charge renters fees, for example when they sign a new tenancy agreement. This will stop tenants being hit with fees averaging £223 per tenancy.
The government will consult on this in due course.
9. Cracking down on pensions scams
A consultation before Christmas will look at ways to tackle pensions scams, including banning businesses from cold calling someone about their pension. This includes scammers targeting people who inadvertently ‘opt-in’ to receiving third party communications.
10. Over £102 million of LIBOR banking fines to support armed forces and emergency services charities
LIBOR fines are collected from banks who break banking rules, and are given directly to causes benefitting armed forces and emergency services charities.
£102 million will go to more than 100 projects supporting armed forces personnel, their families and veterans; emergency service personnel; children’s hospitals, air ambulances and emergency responders; and museums and memorials, over the next 4 years.
Investing in infrastructure and innovation to improve long-term productivity
11. A new National Productivity Investment Fund to provide £23 billion of additional spending, ensuring the UK’s economy is fit for the future
The National Productivity Investment Fund (NPIF) will provide major additional spending in areas that are key to boosting productivity: transport, digital communications, research and development (R&D), and housing.
12. £2.3 billion for a new Housing Infrastructure Fund
The fund will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas where they are needed most.
On top of that, £1.4 billion will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. And another £1.7 billion will be used to speed up the construction of new homes on public sector land.
13. £390 million investment in future transport technology
£390 million will go to future transport technology, including driverless cars, renewable fuels and energy efficient transport. This will include:
- £100 million investment in testing infrastructure for driverless cars
- £150 million to provide at least 550 new electric and hydrogen buses, reduce the emissions of 1,500 existing buses and support taxis to become zero emission
- £80 million to install more charging points for ultra-low emission vehicles
14. A major new investment in transport infrastructure
As part of the National Productivity Investment Fund, this will cover:
- £1.1 billion to reduce congestion and upgrade local roads and public transport
- £220 million to tackle road safety and congestion on Highways England roads
- £27 million to develop an expressway connecting Oxford and Cambridge
There will also be a two-year 100% first year allowance for companies who install electric charge-points, coming in from today?. This allows companies to deduct the cost of the charge-point from their pre-tax profits in that year?.
And £450 million will also be spent on trialling railway digital signalling technology which will expand capacity and improve reliability.
15. £1 billion to invest in full-fibre broadband and trialling 5G networks
Investment will support the private sector to roll out more full-fibre broadband by 2020-21. Funding will also support trials of 5G mobile communications.
And from April 2017, the government will also provide a new 100% business rates relief for new full-fibre infrastructure for a 5 year period.
16. £2 billion more per year in research and development funding by 2020-21
A major increase in research and development funding for universities and businesses with R&D projects to help the UK remain an attractive place for businesses to invest in innovative research.
This will back scientific research and development of technologies such as robotics, artificial intelligence and industrial biotechnology.
17. More money for Scotland, Wales and Northern Ireland
Scotland, Wales and Northern Ireland will receive more money which can be spent on infrastructure projects, with each devolved administration deciding where this will be spent.
This will be an increase of over £800 million for the Scottish Government, over £400 million for the Welsh Government and over £250 million for the Northern Ireland Executive.
18. Expanding the museums and galleries tax relief
The new museums and galleries tax relief will be expanded to include permanent exhibitions.
The new tax relief, which starts in April 2017, was originally only intended to be available for temporary and touring exhibitions.
The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition.
19. Over £10 million to support culture and heritage projects across the UK
£7.6 million will cover urgent and essential repairs to the heritage house, Wentworth Woodhouse in South Yorkshire.
Other cultural projects will also be supported, including:
- £850,000 for a Royal Society of the Arts pilot to promote cultural education in schools
- £1.6 million to help complete Studio 144, an arts complex in Southampton, including an auditorium, studio, and gallery
- £1 million towards the development of a new creative media centre in Plymouth
Providing certainty for businesses
20. Committing to cutting corporation tax to 17% by 2020
The main rate of corporation tax has already been cut from 28% in 2010 to 20%, and will be cut again to 17% by 2020, by far the lowest in the G20 and benefitting over 1 million businesses.
21. £400 million through the British Business Bank to invest in growing innovative firms
The funds will be invested in innovative small businesses with potential for growth, to provide the finance that they need to expand. This will support up to £1 billion of new investment.
22. Rural Rate Relief will increase to 100%
Rural rate relief will increase from 50 to 100% in April 2017, saving a business up to £2900 a year. This business rate relief is available to businesses in rural areas with a population under 3,000, where that business is:
- the only village shop or post office with a rateable value of up to £8,500, or
- the only public house or petrol station with a rateable value of up to £12,500
A fair and sustainable tax system
23. Cracking down on tax avoiders and those who help them
A new penalty is being introduced for those helping someone else to use a tax avoidance scheme. Tax avoiders are hit with significant bills when HMRC defeats their avoidance scheme, this new penalty will ensure that those who help them will also face the consequences.
Also tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.
24. Salary sacrifice schemes will be taxed more fairly
From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income.
In salary sacrifice schemes, employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone). Both the employer and employee make a tax saving, because the benefit is taxed less than a salary or not taxed at all.
This will affect types of salary sacrifice schemes differently:
- pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt
- all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years
25. Insurance Premium Tax will increase by 2% from 1 June 2017
Insurance Premium Tax (IPT) will increase from 10% to 12%. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.