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Chancellor delivers his first - and last - Autumn Statement

24 November 2016

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The Chancellor, Philip Hammond delivered his first – and last – Autumn Statement yesterday (23 November). It was not a fruitful budget for the JAMS (just about managing), says Thames Valley and South Coast accountants James Cowper Kreston.

The big winners from Philip Hammond’s Autumn Statement are businesses across the Thames Valley and the low-earners. 

The losers include those over 55 who have taken advantage of new pension freedoms yet continue to contribute to their pension pots, employees benefiting from salary sacrifice schemes, and large multi-national businesses.

Sharon Bedford, a Partner specialising in Business Tax at James Cowper Kreston said: “Businesses are one of the clear winners from this mini budget.  The reduction in Corporation Tax to 17 per cent, whilst previously announced, is particularly welcome.  It will be interesting to see how the Government will respond if President Elect Trump dramatically reduces US rates.  Could we see a further drop to 15 per cent in 2017?”

“Hammond gave something to both large and small businesses.  Large companies claiming R&D tax credits will welcome the commitment to enhance the relief, and rural business will welcome the announced business rate relief.  The £23bn investment on innovation and infrastructure is a positive move, even if some of that cash may not directly be accessible by business.”

“Colleagues in Oxford and Cambridge are particularly excited by the new East West rail link.  The Oxford Cambridge Expressway will lead to greater collaboration between our two greatest tech hubs, creating a new ‘tech corridor’.”

Ian Miles, a Partner specialising in Personal Tax at James Cowper Kreston said: “There has been much debate on the ‘squeezed middle’, now called the JAMS, or just about managing.  There was little for them to cheer.”

“The over 55s who have taken advantage of the recently introduced pension freedoms will be disappointed by the relief restrictions introduced. Those that continue to earn a wage – and that is likely to be most – will now only be able to claim tax relief on £4,000 contributions to pensions, not £10,000 currently available.”

“Insurance policies are also likely to become more expensive, with an increase to the insurance premium tax.  Whilst it is the insurance companies that shoulder this tax, any increases will undoubtedly be passed on to policy holders.”

“Low earners do however have more reason to cheer; the Chancellor, as well as increasing the personal tax allowance, has also announced an increase to the national living wage, and that will put more cash in pockets.”

James Cowper Kreston Autumn Statement Winners

  • Innovative and entrepreneurial businesses across the Thames valley, following the introduction of a new £23bn investment on innovation and infrastructure. However, is this new money, or funds already allocated? Will it be spent by Government, or will it be a fund accessible by businesses?It is most likely to be a combination of both.

  • Large companies claiming Research & Development tax credits – a commitment to enhance the relief.

  • Low earners – the increase in the personal tax allowance (and higher rate threshold for higher earners) and the increase to the National Living Wage will put more money in pockets.

  • Rural businesses – Rural rates relief will leave rural businesses better off. But the lack of high speed broadband will still cause concerns.

  • Businesses paying corporation tax – the reduction of Corporation Tax to 17%, whilst previously announced is welcomed.Will the Government respond further if Trump were to reduce US rates in the new year?Could we see a drop to, say 15%, in 2017?

  • Businesses in Oxford and Cambridge, with the new East West rail link.The Oxford Cambridge Expressway will lead to greater collaboration between our two greatest tech hubs, creating a new ‘tech corridor’.

  • Housing Association tenants, with right to buy.

  • Fuel duty frozen for seventh year.

  • Abolition of letting agent’s fees for tenants – but subsequent increase in rents as agents pass cost on to landlord?

James Cowper Kreston Autumn Statement Losers

  • Employees who benefit from salary sacrifice perks – such as smart phones, gym memberships, buying cars or private medical insurance.

  • People aged over 55 who have taken cash out of their pension but are still earning.The tax relief currently available to them allowed contributions of up to £10,000; Government is looking to slash this to £4,000.

  • The self-employed – The Government has promised a renewed focus on the self-employed with unusual tax arrangements.

  • Multi-national businesses – the Chancellor is looking to raise some £5bn from large international businesses following restrictions on tax relief on corporate interest and brought forward losses.

  • Those with insurance policies – the increase in the insurance premium tax will undoubtedly be passed on to policy holders.

  • Those not paying tax on offshore income.

  • Accountants – and anyone helping others to use a tax avoidance scheme that fail. Consultation only.

To view a summary of the announcements, please click here.