“Careful, considered and targeted” are the words uttered by the new Chancellor Philip Hammond, when questioned about potential fiscal boosts in the autumn statement. Therefore, it’s safe to say we shouldn’t expect any major positive changes come next Wednesday. Over the past 3 years, previous Chancellor George Osborne’s target was to reduce the UK’s deficit, with drastic changes to tax legislation. He introduced the controversial “dividend tax”, an increase in stamp duty on second homes and by 2019 a disallowing of tax deductible mortgage interest for higher earner landlords.
The Institute For Fiscal Studies published a report stating that the government faces a £25bn black hole in public finances by the end of the current parliament. The study also noted that the UK’s borrowing is estimated to reach £60.5bn, which is a sizeable increase on earlier projections. Therefore it’s safe to say that more “austerity” measures are on the cards!
2016 has also been a politically divisive year. With the country voting to leave the E.U, will this landmark change have an impact on what is announced? Will Brexit cast a huge shadow over what the government is trying to achieve? What can we really expect from our new Chancellor?
We are expecting Mr Hammond to highlight measures to help small house builders.
We know this as a £3bn housing fund was recently announced, which hopes to “get Britain building again.” This fund is designed to help small family firms to build 25,000 new homes by 2020 with a further 200,000 to be built in the future.
In the run up to the last election, Mr Osborne’s government said that it would not raise income tax, national insurance or VAT under its first 4 year term. Other than the new dividend tax, the government has kept to its word, and has even cut the levels of Corporation Tax, which has been welcomed by all SME’s.
Mr Osbourne’s plan was to cut CT to 15%, but this is believed not to be on the agenda of the new Chancellor. He still plans to cut the rate to 17% by April 2020 but stated that the 15% cut was just a suggestion and not a plan!
Capital Gains Tax on Residential Property
Changes made to CGT on residential property sales in 2016 mean that, from 2019, CGT must be paid within 30 days of completion of sale. Many have raised concerns over the implications of this: that it will be impractical and that the figures used for the calculation will be inaccurate. Given that plans have also been set in motion to disallow mortgage interest for higher rate tax earners, might it be a case of one or the other? It would seem unlikely that the Chancellor would implement both in his first term.
Making Tax Digital
In 2015 it was announced that taxpayers could sign up for new “digital tax accounts”, which could lead to taxpayers seeing a better service, where tax liabilities could be calculated in real time. It was designed to ensure that taxpayers would pay the right amounts of tax at the right time, rather than having a situation where millions face underpayments and overpayments of tax after the year end.
Since this announcement, many taxpayers and tax-agents have campaigned for a clear roadmap to its implementation. For many taxpayers the thought of compiling quarterly records by 2018 instead of yearly was quite concerning, especially for those who are not IT literate. For an estimated 5.4 million small businesses and 1.5 million landlords the additional costs of adding new accounting software for quarterly reporting it makes it highly unlikely that these will be ready by 2018.
We expect the Chancellor to review the roadmap, with a potential extension to the current deadline on the cards.
Air Passenger Duty
There are rumours that APD could be cut to financially assist families facing the prospect of higher costs for foreign holidays. The current rate for a short-haul flight in economy class is £13, rising to £73 for flights over 2,000 miles. The long-haul charge is due to rise to £75 from April. The Travel Industry have been campaigning for a cut in APD for prolonged period, could the Chancellor make a cut during this statement?
Mr Hammond is potentially going to concentrate on stimulating the UK’s transport system, by boosting and upgrading roads and railways. Expect this to be mentioned in the Autumn Statement.
The Autumn Statement will be at 12.30pm on Wednesday 23 November 2016. Follow the announcements via our live Twitter Feed Here. We will also follow up the announcements will a full Autumn Statement review.