At the turn of the New Year 2017, it was really important to understand the latest economic policies of the time announced in the then recent Autumn Statement. There were lots of policies announced – some we knew about already and some were new and showed the direction Hammond will be taking the economy.
Some of the things we knew already that were reiterated were:
From April 2017, people were able to earn £11,500 before paying tax. The Conservatives have promised to raise this to £12,500 by 2020-21 and then increase it by the inflation rate.
A change that happened from April 2017 allowed people to pass on property to descendants without paying inheritance tax.
A new Lifetime Individual Savings Account (LISA) for 18-40 year olds started from April 2017. People could save up to £4,000 a year, with the Government adding a 25% bonus if the money is used as a pension or to buy a home.
From April 2017, families having a third (or more) child did not qualify for Child Tax Credit- this could be worth more than £2,000 per child.
From September 2017, parents working over 16 hours a week and earning less than £100,000 a year were said to be able to claim 30 hours of free childcare.
A sugar tax on soft drinks was said to be introduced later (probably from 2018).
What was announced
Benefits – Osborne (Hammond’s predecessor) had announced that working age benefits and tax credits were going to be frozen in cash terms for four years from April 2016. This freeze included JSA and income support. Cuts had also been announced to Universal Credit. These cuts, in conjunction with a likely rise in inflation could hurt low paid workers. Hammond announced a change to the taper rate which will offer some respite as for every £1 someone on Universal Credit earns in work over the allowance (the amount you can earn without your benefit being affected), Universal Credit will also be changed so it will now be reduced by 63p instead of the present level of 65p. The chancellor confirmed that whilst the cap on welfare spending would remain, no more welfare cuts would be announced during this Parliament – but that a cap on welfare spending would remain.
Salary Sacrifice – Employees have been allowed to give up some of their salary in exchange for perks like a car, gym membership or mobile phones. This Salary Sacrifice lowers income tax and National Insurance. From April 2017, Computers, gym membership and health screening would be subject to tax (although pensions, childcare vouchers and bicycles will remain tax free. This is likely to cause some of these schemes to close down.
National Living Wage – this will rise from £7.20 to £7.50 in April, for those aged 25 and over. Earlier in the year, predictions were that this rise would be greater.
Housing – Less than two-thirds of the population own their home in much of the UK, with the typical home in the UK costing £218,000 – £16,000 more than a year ago. The chancellor announced a £2.3 billion Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in high demand areas, and another £1.4 billion towards the construction of affordable homes.
Lettings agents in England will be banned from charging fees upfront to tenants. The chancellor said it would happen “as soon as possible”. The fees can cost tenants hundreds of pounds and will now be paid by the landlord as they can shop around for the cheapest agent.
Fuel duty and Insurance – The chancellor announced that this duty will be frozen for a seventh year which will (on average) save car drivers £130 and van drivers £350.
However, drivers are likely to be hit as the Insurance Premium tax will be increasing by 2% (to 12%) in June 2017. This will be likely to impact all insurance consumers (including home insurance).
Tax Relief – The Government is introducing tax relief on the first £1,000 of income earned from letting your room (through, for e.g. AirBnB) or selling on internet sites or car boot sales.
Whilst it is important to know the headline policies of the Autumn statement, it is more important to be able to consider the implications of the policies.
Look at each policy and consider its impact on:
Analysing the Autumn Statement in this manner will enable you to show you are capable of independent thought and can link in your knowledge and passion for the subject.