The Chancellor announced a range of measures in his Autumn Budget. I’ve concentrated on the measures that affect individuals and small businesses, rather than those that affect larger businesses. How are you affected by the Autumn Budget 2017?
Autumn Budget 2017 – how are you affected?
Income tax and National Insurance
The personal allowance will increase and the Budget confirmed that changes to National Insurance would be delayed:
- Personal allowance: This will rise from £11,500 to £11,850 in April 2018.
- The higher rate threshold will rise from £45,000 to £46,350 from April 2018.
- Marriage allowance: Married couples and those in a civil partnership can currently transfer up to 10% of their unused personal allowance to their spouse or civil partner. You can backdate a claim by up to four years. From today this will also apply to widows, widowers and civil partners. They will be able to backdate this by up to four years. This will come into force on November 29th. You can read more about how the marriage allowance works in my article.
- Abolition of Class 2 NI delayed: This has already been announced on November 2nd – the government will delay scrapping Class 2 NI until April 2019.
- Late payment of tax and late submission of tax returns: The government will introduce a points-based approach to tax penalties. It will also look at whether to simplify late payment charges so they’re the same for different taxes.
- Recovery of income tax owed through self assessment: If you pay tax through PAYE and also fill in a self-assessment form, HMRC will look to reclaim any owed tax faster through PAYE. This will come in from April 6th
Pensions, investments and savings
There are changes to pensions and savings:
- State pension: The state pension will rise by the triple lock, which is inflation, earnings or 2.5%, whichever is the higher. This will apply to the basic state pension and new state pension from April 2018. It will be an extra 3% or £3.65 a week for the full basic state pension, taking it from £122.30 a week to £125.95 a week. The new state pension will rise by £4.80 a week to £164.35.
- Savings tax rate: As well as the £1,000 tax free savings allowance (otherwise called the personal savings allowance) you can earn an extra £5,000 tax free. This assumes you only earn as much as the personal allowance, which is £11,500 in the current tax year. If you earn more than £11,500, the savings tax rate is reduced. The Budget announced that this allowance would remain the same at £5,000 for tax year 2018 – 19.
- ISA allowance: The ISA allowance will stay the same at £20,000 in the tax year 2018 – 19. However, the junior ISA allowance will rise by the consumer prices index (CPI) from £4,128 to £4,260.
- Lifetime limit for pensions: This will increase in line with CPI from £1 million to £1,030,000 in April 2018.
- Save as you earn (SAYE): Employees who are on maternity or parental leave will be able to take a 12 month break from contributing to their SAYE scheme. Currently the limit is six months. This will come in on April 6th 2018. You can read more about employee share ownership schemes in my article.
- Doubling of EIS allowance: People who invest in ‘knowledge intensive’ companies. Currently the investment limit under the Enterprise Investment Scheme (EIS) is £1 million. You can read more about how the EIS scheme works and what the tax benefits are in my article.
- Pension funds will be able to invest in innovative firms: The idea is to allow large pension funds to invest a small amount of their fund into innovative funds.
- Taxation of trusts: The government will publish a consultation in 2018 on how to make the way trusts are taxed simpler to understand and fairer.
Employment, wages and working
- National Living Wage: The NLW will rise by 4.4% from £7.50 to £7.83 an hour from April 2018.
- National Minimum Wage: The NLW is only paid to workers aged 25 or over. Those who are younger get the National Minimum Wage. This will rise by between 3.7% and 5.4%. For apprentices it will rise from £3.50 to £3.70 an hour. For those aged 16-17, it will rise from £4.05 to £4.20 an hour, for those aged 18 – 20 it will rise from £5.60 to £5.90 an hour. For those aged 21 – 24, it will rise by 4.7% from £7.05 to £7.38 an hour.
- IR35: There will be a consultation on people working ‘off payroll’ in the private sector. The consultation will be published in 2018.
- Gig economy: a discussion paper will be published to make it clearer when someone is an employee or worker and when they’re self employed.
- Self funded training: The government will consult on extending tax relief that’s currently available for employed and self-employed people on work-related training. This will take place in 2018.
- Meal allowances: Employers won’t have to check receipts for meals etc if employees claim using benchmark scale rates. This will be introduced in April 2019.
- Meal and travel expenses: HMRC will provide better guidance on meal and travel expenses for employees.
- Caring for an adult who needs support: If you are a shared lives carer (which means you let an adult who needs support live with you), the government will simplify the process of keeping records in order to claim Qualifying Care Relief. You can read about Qualifying Care Relief on the Gov.uk website.
Stamp duty, housing and capital gains tax
As well as the big change to stamp duty for first time buyers, there were other property tax announcements.
- Abolition of stamp duty for first time buyers up to £300,000. If you’re a first time buyer and you’re completing on your property today or after today, you won’t pay any stamp duty on the first £300,000 if you’re buying a property costing up to £500,000. If you buy a property costing more than £500,000, you can’t take advantage of this measure. Previously, stamp duty (for all buyers) applied to properties costing £125,000 or more.
SAVVY TIP: This will apply to first time buyers in England, Wales (until April 2018) and Northern Ireland, but not in Scotland, which has a different land tax system. The average stamp duty that first time buyers currently pay is £1,660. In order to qualify, you cannot have owned a property in the past – in the UK or elsewhere in the world. If you’re buying jointly, all of you must be first time buyers. If you’ve already completed on your property, you can’t claim this retrospectively.
- Help to buy equity loan: In October the government announced an extra £10 billion for this scheme. Today’s Budget confirmed this.
- Rent payments and credit rating: The government will launch a £2 million fund so that first time buyers’ rental payment records can be recognised in their credit scores and used in mortgage applications. At the moment, mortgage lenders and credit reference agencies don’t have access to rental payment data.
- Empty home premium: Councils will be able to charge empty homes an extra 100% council tax. Currently the limit is 50%.
- Right to buy housing association properties: A pilot in the Midlands will go ahead so that people can buy their housing association home.
- Longer tenancies: There will be a consultation into why private sector landlords don’t offer longer tenancies.
- Stamp duty for second properties: A higher rate of stamp duty – 3% above the normal rates – was introduced for second properties in April 2016. Today’s Budget includes a change which means that if you’re buying a property from your husband, wife or civil partner you won’t pay the higher rate, and it will also clamp down on abuse where someone changes which of their properties is their main residence but keeps an interest in what was their main residence. This comes into effect from today.
- Capital gains tax allowances increased: The capital gains tax allowance will rise from £11,300 to £11,700 in April 2018, and from £5,650 to £5,850 for trustees.
- Plans to introduce 30 day payment time delayed: the Budget of 2016 announced plans to introduce a 30 day window by which capital gains tax on the sale of a second property had to be paid. This is being delayed until April 2020 from April 2019.
- Rent-a-room relief: At the moment you can earn up to £7,500 a year tax free if you rent a room to a lodger. The Chancellor announced that they’d ask for evidence about how this is used to make sure it’s used for long term lettings (and I’m assuming, not by Airbnb type rents). You can read more about how the rent-a-room scheme works in my article.
Welfare and benefits
- Help for tenants on benefits in high rent areas. Extra help for people who claim housing benefit and universal credit and who live in a high rent cost area.
- Universal credit seven day wait period: This period before you can be entitled to universal credit will be abolished. This will be introduced in February 2018 and means you’ll be entitled to universal credit the day you apply, rather than waiting for seven days.
- Universal credit advance: From January 2018, you’ll be able to get an advance of up to a month’s universal credit within five days. You’ll be able to pay it back over a year, rather than the current six months. If you’re claiming in December for the first time, you’ll be able to get an advance of 50% and another 50% in January.
- Universal credit and housing benefit: From April 2018, if you’re a new universal credit claimant and you get housing benefit, you’ll continue to receive it for the first two weeks of your universal credit claim.
SAVVY TIP: It will also be easier for people on universal credit to get their housing costs paid directly to their landlord.
Cars and transport
- Railcard for 26 – 30s: A railcard for 26 – 30 year olds will be introduced in the spring of 2018. It will give a third off most rail fares, although there is likely to be a minimum spend or fare on peak times. Greater Anglia is going to start trialling this railcard early in December and it will be rolled out in 2018.
- Fuel duty frozen: Rates of fuel duty will be frozen for another year. The government says the average driver will be £850 better off overall by April 2019, compared to if the fuel duty rises had been implemented since 2010.
- Car tax rates: The rates for car tax will rise by the retail prices index (RPI) from 1st April 2018. All rates for cars, vans and motorbikes will rise by this amount, as will first year rates for cars registered after April 2017.
- Charging electric car at work: The Budget said that from 2018 employees won’t have to pay a benefit in kind charge for electricity used when charging their electric car at work.
- New diesel cars: New diesel cars that aren’t the ‘next generation’ clean ones (those that meet emissions standards in real driving conditions) will have to pay a car tax (VED) supplement from 1st April 2018. It effectively means that in the first year they’ll pay car tax at the rate of the next band up.
- Diesel supplement for company car tax: From 6th April 2018, company car tax diesel supplement will rise from 3% to 4%, unless the car is a next generation clean diesel car.
- Air passenger duty rates frozen for economy fares: From 2019 – 20, short haul rates will be frozen and economy long haul rates will be frozen at 2018 – 19 rates. Business class, premium and first class passengers will pay an extra £16 and those travelling by private jet will pay an extra £47.
- Review of airline insolvency arrangements: After the failure of Monarch airlines, there will be a review into consumer protection if an airline fails. One change could be to allow airlines to wind down in an orderly way so that taxpayers don’t have to pick up the bill of bringing holidaymakers home.
Tax and environment
- Plastic cup and bottle tax: A consultation in 2018 on how to tax plastic cups and bottles or charges that could be imposed, to reduce their waste.
- Flood defences: There will be an extra £76 million spent on flood defences.
Alcohol and tobacco
- Cider, beer, wine and spirit duty: These rates have been frozen.
- Cider tax: A new rate of tax for still cider and perry will be introduced in April 2019 – set at 7.5% (the current rate is 6.9%).
- Tobacco duty: Duty rates on tobacco and cigarettes will rise by RPI plus 2% until the end of the current parliamentary term. This kicks in at 6pm today.
The VAT threshold – the level of sales at which you have to register for VAT – will be unchanged at £85,000 for the next two years – until April 2020.
- Online marketplaces and VAT: Online marketplaces, such as eBay and Amazon, will be jointly liable for unpaid VAT by all sellers on their platforms. This will come into force after it gets Royal Assent in the spring. Online marketplaces must also ensure that businesses operating on their website display valid VAT numbers.
SAVVY TIP: The government says it will also ask for evidence in the spring of 2018 of ways that online selling platforms can make sure that sellers don’t avoid tax.
- Making tax digital: Making tax digital will be introduced in April 2019 (its delay was announced in July) and only for business that are VAT registered. Today’s Budget announces that only VAT payments will be part of the April 2019 roll out. Making tax digital won’t be extended until it’s shown that the system works – not before April 2020 at the earliest.
- Women in STEM (science, technology, engineering and maths). The government will look at how to improve data on the issue of the lack of girls in STEM, to address the lack of girls studying STEM subjects.
- Centenary fund: The March Budget this year announced that £5 million would be available to celebrate the centenary of some women getting the vote. Today it announced that £1.2 million would fund activities in seven cities – Bolton, Bristol, Leeds, Leicester, London, Manchester and Nottingham. The government will allocate the rest to community projects and a statue of Millicent Fawcett in Parliament Square.
- Student loan overpayments: By April 2019 the Student Loans Company and HM Revenue and Customs will share data better so students don’t overpay their student loans.
- Increased funding for the Competition and Markets Authority. The CMA will get an extra £2.8 million a year and it will be allowed to keep more of its fines towards the legal cost of defending its decisions.
- Open banking: From next year, open banking (which lets you share bank details between banks), will be extended beyond current accounts to credit cards.
- Challenger banks: There will be a fund of RBS of £775 million to help challenger banks for business. This isn’t a new announcement as it was announced in September.
- Post Office banking: The Post Office will try and raise awareness of the banking services it offers.
- Credit Unions: The number of potential members that any one credit union can have will rise from two to three million.
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