Autumn Statement: November 2015 — Key Highlights

26 November 2015

The Chancellor, George Osborne, delivered his Autumn Statement and Spending Review at 12.30pm on 25 November 2015. His theme was very much 'rebuilding Britain', both figuratively and literally. The headline announcement was the Government's U-turn on the planned cuts to tax credits: it was announced that there will be no further changes to the Universal Credit taper or the Work Allowance beyond those passed through Parliament last week. However, the devil will be in the detail and it was made clear that the planned welfare savings of £12 billion will be achieved in full. As you can guess, there was not much 'Christmas cheer' in meeting these austere targets, but a big U-turn on Tax Credits was one of the main headlines and a relief to hard pushed families.

The Chancellor announced that, since 2010, no economy in the G7 has grown faster than Britain. Growth of 2.40% is forecast for 2015, unchanged from the June forecast and despite expectations for world growth and world trade being revised down. The Government's four year public spending plans are forecast to deliver a surplus in 2019/2020 and the Office for Budget Responsibility (OBR) also predicts an end next year to the longest period of rising debt in British history.

Despite this positive outlook, deep cuts to the budgets of a range of Government departments were announced and it remains to be seen how these will impact upon civil service jobs – a raft of redundancies does seem somewhat inevitable.

In terms of changes to personal taxation and pensions, there is precious little to report – possibly a case of 'no news is good news'. However, if you own, or are thinking about buying, a second home, you might get a bit of a shock, as detailed below.

Significant investment in new infrastructure and affordable housing has been announced, as has the largest road investment programme since the 1970s (including a 'permanent pothole fund' – cue cheers from motorists and black looks from car tyre manufacturers).

We have listed below the main points that could affect your financial planning and your household income. These are as follows:

Pensions

  • No further changes announced to personal pension taxation or the HMRC Lifetime and Annual Allowances for pension savings. This is in many ways quite welcome, given the fundamental changes to the pensions landscape that have taken place over the last 18 months.
  • The basic State Pension will rise by £3.35 per week from April 2016, to £119.30 gross per week – noted as the biggest real terms increase to the State Pension in 15 years.
  • The new single tier State Pension will be introduced in April 2016 and the Chancellor announced today that the full flat-rate weekly State Pension under the new regime will be £155.65 gross per week, which is higher than the current means-tested benefit for the lowest income pensioners. Property owners
  • From April 2016, those who purchase a second home or a property to use for buy-to-let will pay an extra 3% in stamp duty. This is aimed to raise £1 billion in extra funds by 2021 and will be used to help build 400,000 new affordable homes.
  • By 2019, any Capital Gains Tax due on the sale of a residential property (not your main home) will have to be paid within 30 days of the sale. Currently, individuals have up to 21 months after the sale of a property to settle the CGT liability. Household bills
  • Council Tax: local councils will be allowed to introduce a new social care levy of up to 2% on council tax bills.
  • Energy bills: a cheaper domestic energy efficiency scheme is being introduced. This will replace the Energy Company Obligation (ECO) scheme and aims to save 24 million households around £30 a year on their energy bill.
  • Car insurance: reforms to the 'compensation culture' around minor motor accident claims will be brought forward. The Government is targeting savings of £1 billion from the cost of providing motor insurance, which it hopes will be passed on to motorists.

Small businesses and charities

  • Tax returns: every individual and small business will have their own individual digital tax account by the end of the decade.
  • Workplace pensions / auto-enrolment: rises to the minimum contribution rates have been delayed by six months. The first rate rise will now take place in April 2018 (previously October 2017) and the second in April 2019 (originally due in October 2018). The delay will be helpful to small businesses both financially and in terms of the administration of the rate rises, which will now be aligned with the tax year.
  • Small business rate relief: extended for another year – approximately 405,000 of the smallest businesses will continue to receive 100% relief from business rates until April 2017.
  • Apprenticeships: funding for apprenticeships will increase, funded by an 'apprenticeship levy' from April 2017, which will amount to 0.50% of an employer's wage bill. Businesses will have a £15,000 allowance to set against this levy, meaning that the smallest businesses should be protected.
  • Support for mental health: £600 million of additional funding has been announced – great news for charities working in this sector.

As always, no individual advice is provided during the course of this blog. If you would like advice on the changes announced in the Autumn Statement and Spending Review then please contact the team at Chapters Financial Limited at our Woking or Guildford offices.

Keith Churchouse FPFS
Director
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.