Annual Autumn Statement 2016

Philip Hammond delivered his first and last Autumn Statement on 23 November.

In his speech, Mr Hammond spoke about a productivity gap in the UK, and how closing this gap should be our main priority.  There were a number of announcements in respect of funds allocated to infrastructure and development projects.  Although there were a number of positive things he spoke about, the announcements lacked detail in terms of mechanics and timing.

Perhaps the biggest announcement was retained for his closing “one more thing”.  Future Budgets will be set out in the Autumn rather than the Spring, and the Autumn Statement will effectively be abolished.  This is a welcome change as it gives more time for parliamentary scrutiny that will hopefully reduce the chances of the introduction of legislation that has unintended consequences, which then need to be retrospectively reversed in subsequent years.

There were no other major disruptions announced in this Statement, which is a good thing.  Many businesses will have enough disruption over the next 2½ years, dealing with the uncertainty over supply chains and customers as a result of the nation’s desire to leave the EU and the implications when they are eventually known.

Notable by its absence in his speech was any reference to HMRC’s Making Tax Digital proposals that will require businesses to regularly upload accounting data during the course of the year.  The government will respond to the consultations in January 2017, so we shall have to wait to see if they take on board the overwhelming professional view that its introduction should be deferred to allow proper implementation.

Tax highlights of the announcements in the Autumn Statement and accompanying documents are:

• The level at which income becomes subject to National Insurance will be consistent for employer and employee contributions from April 2017, at £157 per week. Longer term consideration will be given to different methods of calculating employer contributions.
• Tax and National Insurance advantages of salary sacrifice schemes will be removed, except where these relate to certain tax-free benefits (pensions, childcare and cycle to work scheme) or ultra-low emission cars. This will particularly affect arrangements involving otherwise tax-free benefits such as mobile phones.
• Simplification and broadening of the tax exemption for companies disposing of shares in other trading companies from April 2017.
• Removal of Employee Shareholder Status tax advantages, introduced 3 years ago, for individuals who gave up employment rights in exchange for shares.
• New lower Company Car Tax bands for the lowest emitting cars from 2020. Meanwhile the benefit percentage for each band will increase by 2% in April 2017 as previously prescribed.
• Tax relief for businesses installing electric vehicle charging points.
• New rate in the VAT Flat Rate Scheme for smaller businesses that incur little or no VAT on purchase of goods, such as labour-only businesses, to prevent them obtaining a significant VAT saving.

Previously announced changes that were confirmed include:

• Income Tax personal allowance rising to £11,500 next year, with the commitment to reach £12,500 by the end of this Parliament. Once it reaches that level it will be pegged to inflation (rather than the National Minimum Wage as previously envisaged).  The higher rate band is also to increase next year, from £43,000 to £45,000.
• Off-payroll individuals working in the public sector through a company, but undertaking a role similar to employees, will be taxed as if they were employees.
• New scheme for basic rate tax relief on childcare costs to be introduced from April 2017.
• Income Tax allowances for small levels of trading or property income – income below £1,000 will not need to be declared.
• Corporation Tax rate to reduce to 17% in 2020.
• Improved relief for Corporation Tax losses carried forward where they arise after 1 April 2017.

In addition, a number of proposed consultations were announced, in particular covering the taxation of partnership income and the use of companies by individuals as a tax saving measure.  We will know more about these once the consultation details are announced.

Most other rates are unchanged in the Autumn Statement, including VAT, Income Tax, Corporation Tax, Capital Gains Tax and Inheritance Tax, although changes to these could be announced in the (final) Spring Budget next year.  If you have any query on any of the above and how it might affect you, please do not hesitate to contact us.