Chancellor Phillip Hammond delivered his annual Autumn budget yesterday. Under increasing pressure as the Brexit negotiations falter, he had precious little room for manoeuvre, with the result that we were delivered a rather tepid budget. It is important to remember, and will be going forward, that much of what the Chancellor delivers in his UK budget is not relevant to Scotland, and we must wait for the Holyrood budget in December to find out what lies in store north of the border.I will look to make clear in my summary of the key budget points below which are UK wide and which are not relevant to Scotland;
- The headline policy is the abolition of stamp duty for first-time buyers purchasing properties worth up to £300,000. Clearly an attempt to stimulate the housing market by impacting on the demand side , we also heard the Chancellor state that he would look to increase supply of new houses to 300,000 per annum in the coming years. Scotland, of course, has control of stamp duty [LBTT] and we wait to find out if Derek Mackay will follow suit on 14th December!
- The planned rise in fuel duty from April 2018 was scrapped in a welcome move for motorists already feeling the effects of increased petrol and diesel prices.
- We already knew of the planned increases to the tax on company car drivers. However, a further 1% is being added to those drivers of diesel cars. This is likely to be part of a growing trend in coming years as the pressure mounts to “go electric”.
- The tax-free personal allowance on income tax is to rise in line with inflation from April 2018 to £11,850. This applies throughout the UK.
- The higher-rate tax threshold is to increase in line with inflation from April 2018 to £46,350. This will not apply in Scotland where taxpayers earning more than £46,350 will pay around £600 p.a. more income tax that their fellow UK citizens living in England, Wales and Northern Ireland.
- The national living wage will rise in April 2018 from £7.50 an hour to £7.83.
- Despite much speculation, the VAT threshold for registration is to remain at £85,000 for at least two years.
- A further £2.3bn has been allocated for investment in research & development.
- Young person’s railcard extended to 26-30 year olds, giving a third off rail fares.
- Despite speculation, the Chancellor has not [yet] reversed his decision to reduce the corporation tax rate to 17% from April 2020!
Despite the current annual deficit now being lower than was forecast earlier in the year, Mr Hammond warned us that we should not expect to be back in surplus even into the mid-2020’s. This is due to the downgrading of the growth forecasts in the coming years, and this in turn is due to the productivity growth being revised down by an average of 0.7% a year up to 2023. This is the key matter which is holding the UK back and has been doing so for several years now. The output per hour by workers is stubbornly static and until such time as a solution is found to this we are unlikely to see a real recovery in the UK’s financial fortunes.
We hope that you find our budget summary here of interest and should you wish to discuss any aspect of the budget further please do not hesitate to get in touch with me or one of your other Drummond Laurie contacts.