Autumn Budget – spooky stuff?30 October 2018
Monday 29 October 2018 saw the delivery of the Chancellor's Autumn Budget – the earliest budget date since 1962 and also the first Budget since that year to be delivered on a Monday. The day normally chosen for delivery is a Wednesday; however, given that this would have been Hallowe'en, it's probably best that Mr Hammond tried to avoid the puns, as he acknowledged in his speech that would inevitably haunt any announcements made on the spookiest day of the year.
The details below are only part of the headlines revealed in today's speech, and much of the detail, as Mr Hammond MP noted on a few occasions, will be in his red book, published at The Budget. We have picked out some of the headlines.
'End to austerity'?
The Chancellor is usually stuck between a rock and a hard place, but one would think possibly even more so this year. It's the last Budget before Brexit, 5 months to be exact, which would indicate caution in the face of uncertainty; however, the Prime Minister has promised an 'end to austerity', so Mr Hammond has been under pressure to make this happen, particularly in terms of spending on the NHS and mental health services. Mr Hammond noted austerity 'coming to an end', rather than ending
However, Mr Hammond came across as confident – even ebullient, although this was tempered with a declaration that 'discipline will remain'. The 2018 growth forecast for the UK has been upgraded from 1.3% to 1.6% and growth is forecast at 1.4%, 1.4%, 1.5% and 1.5% in the four subsequent years. Wages growth is at its highest for nearly a decade and public borrowing and debt as a share of GDP are both falling.
Funding to Public Services
An extra £500M has been set aside for preparations for leaving the EU and the Chancellor noted that he would upgrade the Spring Statement in March 2019 if this is required (for example, in the event of a no deal Brexit). Indeed, the whole Budget came across as something of a possible 'set piece' for the benefit of the EU, declaring Britain's readiness to take on whatever challenges may await them in negotiations.
As expected, significant spending increases have been announced for the NHS (an extra £20.5BN for the NHS over the next five years) with an extra £2BN a year for mental health services as a minimum, to include mental health crisis support for every A&E department in the UK. There was also a boost in defence and security spending, with an extra £1BN announced for the armed forces, cyber capabilities and the UK's nuclear submarine programme.
It is noted that there will be further help in the roll out and implementation of Universal Credit, but the planning of this programme will not stop.
With significant continued support towards the UK infrastructure, The Chancellor declared his scepticism regarding the value that Private Finance Initiative (PFI) contracts have delivered in the past and made a surprise announcement that such contract arrangements will be abolished going forward. He also announced a new digital services tax on the UK revenues of large technology companies (insert Hallowe'en/FAANGs joke here) from April 2020.
As a final point on this topic, you might find that you are spending less on new tyres going forward – a £30BN package for England's roads was announced, alongside a 30% growth in infrastructure spending.
In terms of personal finances, the key headlines were as follows:
- Income tax personal allowance and higher rate tax threshold to be increased to meet manifesto pledges a year early. The personal allowance will rise to £12,500 and the higher rate tax threshold to £50,000 from April 2019 rather than April 2020 and will be indexed from the tax year 2021/2022
- The adult ISA annual subscription limit for 2019/2020 will remain unchanged at £20,000. The annual subscription limit for a Junior ISA (JISA) or Child Trust Fund (CTF) will be uprated in line with CPI to £4,368
- Stamp duty relief will be extended to first time shared equity purchases of up to £500,000
- Lettings relief will be limited to properties where the owner is in shared occupancy with their tenant
- For small businesses, the VAT threshold will remain unchanged for a further two years at £85,000 and the business rates bill for companies with a rateable value of £51,000 or less will be cut by a third over two years.
- Entrepreneurs' relief was retained, although the minimum qualifying period has been extended from 12 months to two years.
- …and nothing on pensions despite the rumours!
We hope this update is helpful in looking at today's Budget. If you need help with your own financial planning, then please contact the team at Chapters Financial Limited and please note that no individual advice has been provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.